09 Apr Homeowner Flood Insurance Affordability Act
After a series of devastating natural disasters left the National Flood Insurance Program (NFIP) with a balance nearing negative $24 billion, the Biggert-Waters Act of 2012 was passed through Congress and signed into law by President Barack Obama. A bipartisan effort, the bill was passed to cut the amount of insurance subsidies the federal government would offer to owners of property in flood-prone areas, while also creating new maps that outlined areas of increased flood risk. The owners of property in these areas would be required to pay higher flood insurance premiums over a specified amount of time. Supported by many members of Congress at the time of the bill’s passage, their hope was that the changes brought about by the bill would prevent the NFIP from going any further into debt and would also limit the amount of subsidies going to individuals who willingly built or rebuilt homes and buildings in known flood-prone areas.
However, it wasn’t long before uproar from homeowners in these flood-affected areas reached Congress and caused some representatives (including one of the bill’s sponsors) to eventually ask for the bill’s repeal or delay. While data from the NFIP suggested that nearly eighty-one percent of homeowners would not see any increase in premiums, the remaining nineteen percent would be faced with significant changes. Among those remaining policyholders included the five percent who would see their premiums raise nearly twenty-five percent above what they had been paying up to that point.
The Biggert-Waters Act had other effects besides raised premiums, including home sales that were abandoned or delayed due to confusion surrounding the new policy guidelines and the prohibitively high costs of the new premiums. The National Realator’s Association estimated that nearly forty thousand sales were negatively affected during one six-month period because of the bill.
As a result of the backlash to the effects of the Biggert-Waters Act of 2012, the Homeowner Flood Insurance Affordability Act (HFIAA) was passed in March 2014 to repeal some of the bill’s provisions and change others. As welcome as the Act was to some, the HFIAA will not be the immediate correction that many property owners sought. The changes that would lower some premium rates might not take effect for up to a year, depending on when the Federal Emergency Management Agency (FEMA) is able to reassess the new rates for the NFIP. Owners of businesses and second homes located in flood-prone areas will not receive a reduction in their insurance premiums for those properties. A third change brought about by the HFIAA, which would allow homebuyers to enjoy the lower premiums paid by the former owners of the property instead of paying newer, higher premiums of their own, has not been put into place at this time. While these changes will be beneficial to some homeowners, many experts agree that a more permanent and effective solution must be put into place by the federal government with regards to offering flood insurance subsidies to residents of flood-prone areas.
All information is general in nature and is intended to provide guidance only. It is up to you to request specific coverage options, the agency and agent do not bear this responsibility. Always read the policy if there is a questions about coverage or a claim. If any information herein should conflict with your actual policy’s specific language, the policy language will be controlling.
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