Flood Insurance Premiums Increase Today

From this mornings News

Flood insurance rates are scheduled to rise by about 20 percent Wednesday, as the federal government begins reducing subsidies on the coverage.

The increases are meant to address large deficits in the National Flood Insurance Program, which suffered deep losses after Hurricane Katrina in 2005 and superstorm Sandy in 2012.

The federal government has long provided flood insurance because the private insurance market avoids that risk, and about 20 percent of policyholders have been subsidized, to keep premiums affordable. The Biggert-Waters Act of 2012 attempted to deal with the deficits by phasing out those federal subsidies. Advocates of the law argued that it's unfair to make taxpayers subsidize homeowners in flood plains - especially wealthy owners of vacation homes.

According to the flood insurance program, which is part of the Federal Emergency Management Agency, average premiums and surcharges on subsidized properties are set to rise about 21 percent, to $1,878. Average costs on non-subsidized properties are set to rise 19 percent, to $638. The increases take effect when the policy is renewed.

Subsidized rates will continue to rise by as much as 25 percent a year until they reach their full-risk cost on primary residences that have suffered "severe, repetitive" flood losses and on vacation, business or rental properties in high-risk areas. Severe, repetitive losses are defined as at least four flood insurance claims of at least $5,000 each, or two claims that total more than the building's value.

But some of the original provisions of the Biggert-Waters law were softened last year, after complaints from real estate agents and homeowners. Under Biggert-Waters, after a home sale, the new owner would immediately have to pay the unsubsidized rate - which would have pushed some North Jersey premiums over $10,000 or $12,000 a year, even for modest homes. That made it almost impossible to sell homes in flood-prone neighborhoods, real estate agents said.

In response, Congress last year passed the Homeowner Flood Insurance Affordability Act, which slowed the rate of some premium increases and allowed home buyers to continue paying at the previous owner's subsidized rates.

According to the Insurance Information Institute, New Jersey had the largest number of flood claims in fiscal 2013, with about 75,300 claims totaling $3.8 billion - almost half the total $8.2 billion paid in the entire nation that year. There are about 244,000 flood insurance policies in the state.