Navigating the New Flood Laws

The Biggert-Waters Flood Insurance Reform Act of 2012

The Biggert-Waters Flood Insurance Reform Act calls on FEMA to make a number of changes to the way the National Flood Insurance Program (NFIP) is managed. This act became operational on October 1, 2013.

Key provisions of the legislation will require the NFIP to:

  • Raise flood insurance policy rates 25% annually for a small number of policy holders and much lower increases for many policy holders to reflect the full risk of a flood loss
  • Make the program more financially stable (self-sustaining)
  • Change how Flood Insurance Rate Map (FIRM) updates impact policyholders

The changes will mean premium rate increases for some – but not all –policyholders over time.

Flood Insurance: Understanding the Basics

Flooding is the most common & costly natural disaster in the US.
  • There is no coverage for flooding under a standard homeowner or renter’s policy or most commercial policies.
  • Flood insurance can only be purchased through an insurance agent; you cannot buy it directly from the federal government.
What your flood policy will cover:
  • Residential Buildings up to $250,000 and non-residential buildings up to $500,000
  • Residential Contents up to $100,000 and non-residential contents up to $500,000
  • Excess flood coverage may be available through the private sector
What your flood policy will NOT cover:
  • Damage caused by moisture, mildew or mold that could have been avoided by the property owner
  • Currency, precious metals and valuable papers
  • Property outside of such as trees, plants, wells, septic systems, decks, fences, pools, hot tubs,etc.
  • Living expenses such as temporary housing

Flood Insurance:The New Requirements

What are Flood Insurance Premiums based on?
  • Flood insurance premiums are based on a number of factors including date and style of your home’s construction. The most important factor is the elevation of a structure in relation to the Base Flood Elevation (BFE). The BFE is the elevation where there is a 1% or greater annual chance of flooding.
  • You must get an elevation certificate for a property in a high-risk zone in order to determine the full risk premium. Elevation Certificates are required for property in high-risk zones to determine the full risk premium.
What is an Elevation Certificate and how do you get one?
  • An Elevation Certificate is a form completed and signed by a licensed engineer or surveyor.
  • There are a series of measurements needed to determine your home’s “lowest floor” in relation to the BFE.
  • If you are buying from a previous owner, check with them to see if they have an elevation certificate. The certificates remain valid, regardless of age, as long as there have been no significant changes/improvements made to the property. Or call a local surveyor or engineer and request an elevation certificate for your property.

Is there a waiting period before flood insurance goes into effect?

Typically, there is a 30-day waiting period from the date of application before your policy goes into effect. There are very limited exceptions.

How much does Flood Insurance Cost?
  • Rates are set and do not differ from company to company or agent to agent.
  • Higher deductibles can lower your premium;deductibles apply separately to Building and Contents
Are there Mandatory Requirements regarding purchasing flood insurance?
  • Homes and businesses with mortgages from federally regulated or insured lenders in high-risk flood areas are required to have flood insurance.
  • Lenders can require flood insurance even if it is not federally required.

Resources:

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