Flood Insurance Changes Will Reduce Anxiety Along the Coasts

Category: Retirement Real Estate

March 14, 2014 — President Obama is set to sign a new bill passed by the Senate and House that rolls back planned flood insurance increases. The National Association of Home Builders (NAHB) welcomed the Homeowner Flood Insurance Affordability Act, saying: “Flood insurance legislation will provide much-needed certainty to home owners and financial stability for the National Flood Insurance Program (NFIP).

Home builders believe the reform will provide an important boost to home building and remodeling. People who own homes affected by the 2012 Biggert-Waters Flood Insurance Reform Act are relieved that they will not have to face huge premium spikes and impacts on the sale, construction and remodeling of their homes.

The legislation provides a more affordable rate structure for policyholders; repeals the requirement that flood insurance premiums increase immediately to full actuarial rates for homes that are sold; and restores “grandfathering” for properties that were paying premiums applicable to their initial flood risk rating, allowing owners to pay premiums based on the original risk zone rather than updated flood risk zones.

Not Everyone is Celebrating
Not everyone is as pleased with the new law. The Associated Press reported that Steve Ellis, vice president of Taxpayers for Common Sense, a Washington-based watchdog group said of it: “While politically expedient today, this abdication of responsibility by Congress is going to come back and bite them and taxpayers when the next disaster strikes.” He went on to say that this new law is not economically viable over the long term.

Not everyone is covered by the new law. Multiple apartment units, people who have had multiple claims in the past, and some others will not get relief.

What you should know about this law
If you own a home in a flood zone that is affected by this law, it looks like you have gotten at least some temporary relief from crippling rate increases. Think about rebuilding above the flood zone if you can; in the long run it will probably be cheaper than paying market rates. If you are contemplating buying a home in or near a flood zone, make sure you know exactly what you are getting into. Eventually flood insurance rates will be actuarially sound – so today’s rates might not always be so low.

Comments: Have you been affected by the Biggert-Waters bill and subsequent changes? Please share your experiences in the Comments section below.

Posted by Admin on March 14th, 2014

12 Comments »

  1. This is definitely not good news for taxpayers who have prudently purchased property not in a flood zone. Those taxpayers are subsidizing those who did purchase in a flood zone. Once again a special interest group profits at the expense of the rest of us.

    by Linda — March 15, 2014

  2. Linda, perhaps so, but please don’t forget that floods occur in various places along rivers and plains after a long hard rain.
    We also contribute to general insurances, and pay for others who live in areas prone to massive fires (CA and AZ come to mind),tornadoes as well as hurricane prone states.

    by Godsgirl — March 16, 2014

  3. Linda, I’ve lived on Hilton Head Island for a number of years. There’s never been a hurricane that has even really has been a close call in more than two.decades. During that time, I have been happy to support my fellow citizens in times of tornadoes, earthquakes, forest fires, blizzards and whatever else mother nature could come up with. I am now trying to sell my house so that I can move somewhere cheaper. Without that new law, people were trying to offer $100,000 less than what my house has recently been appraised for. A lot of people who live near coastal areas aren’t wealthy. We would have been devastated. Barbara

    by Barbara — March 16, 2014

  4. Those of us who live in Tornado Alley pay insurance rates based on the risk. People who live in flood plains or on the ocean do not. That’s what the term actuarially sound means. It’s not a question of rich vs. poor. It’s a question of paying based on risk vs. being subsidized by others.

    by Linda — March 16, 2014

  5. We are thinking of retiring to South Carolina around Myrtle Beach/Murrell’s Inlet. Can anyone give me an idea how expensive homeowner’s insurance is on the coast? I’ve read a lot on here in other areas about Florida being very expensive. We currently live in MD and pay around $1,200 for approx. $300,000 replacement value and other.

    by Brenda — March 16, 2014

  6. Brenda, we live in Murrells Inlet, just over two miles from the ocean as the crow flies. Our homeowner’s insurance is about $1,300 for a prox replacement of $310.000. New construction has all the new hurricane building codes. Some insurance companies would not quote coverage if you are within a mile of the coast.

    by Tom — March 17, 2014

  7. Brenda, in addition to your regular insurance, be prepared to pay a hefty amount for wind and hail and for flood as well. I pay about $2000 for regular insurance, $4500 for wind and hail and $900 for flood on a 3000 sq. Ft house about 1/4 mile from water. It’s just ridiculous.

    by Barbara — March 18, 2014

  8. Brenda, the amount I quoted includes wind and hail. And I was not required to buy flood insurance.

    by Tom — March 18, 2014

  9. To Tom ..thanks for insurance info very enlightening..we had looked in Florida and found a beautiful newly beong built home..priced 250k..and wre reluctant to buy without , first, checking insurance rates etc..since we had inurance with the same company for over 40 years in previous homes they were asked for a quote..and we were told they have not issued any new policy in Florida for the past 3 years..so we checked with major providers and all were reluctant to issues a policy
    the selling agency for the home told us the State of Florida had its’ own company called CITIZENS..and we researched that company..found out in on line search they did insure and are currently paying large bonuses to small companies to take their policies..the State has set up a 44 Million Fund to pay the bonus..and they have a goal to terminate their involvement in Home Insurance..some of the smaller companies are recent ‘start ups’ and not much is known about their solvency etc..there are articles on line discussing our findings in detail..newspaper articles from Florida Newpapers discuss the findings and States position..also it is not true that if you are inland it is cheaper etc..rather the State does not allow companies to say yes here and no to other places..so the end result is we decided not to buy in Florida..
    Now your info about Corolinas is interesting as that was our next endeavor…Hilton , specifically..will still look but do our homework ..
    and my last piece will be to ask if anyone has any information about Delaware as that State is mostly coastal anywhere ..
    thanks to EVERYONE who blogs as we have found so many good articles..helping manage our plans..

    by Robbie — March 18, 2014

  10. I find it very puzzling that so many people looking in Florida have a hard time finding home insurance. We moved to Fort Myers a year ago into a new home build with all current hurricane building codes and had no problem obtaining insurance. The company we went through found quotes from fifteen different companies. Our insurance on a $320,000 appraised home is $1682 yr. We are NOT in a flood zone; however we are in a community with a series of lakes and for peace of mind elected to get flood insurance at $414 yr. We find this very reasonable after moving from Texas two years ago where we paid over $3,000 a year in a non-flood zone for coverage with high deductibles. Another reader mentioned Citizens Insurance – the State of Florida agency – and yes, they are trying to get out of insuring homeowners but in place of that numerous new carriers have come into Florida and are writing policies. Ironically, we had State Farm in Texas for over 25 years and they were not writing in Florida when we moved. I recently read in our newspaper they are coming back so anyone who decides not to move to Florida because of home insurance, I can only say you need to find a good agency in the area you like and talk with them….I don’t know of anyone in our area (we are in an area where homes are being built as fast as the builder can put them up) who had a problem getting insurance.

    by Toni — March 18, 2014

  11. Thanks everyone for the experienced input. It is really helpful to the undecided. We just want to get away from long winters with lots of snow and sub-zero temps.:smile:

    by Brenda — March 18, 2014

  12. If the Government would get out of insurance business there would be fewer buildings near the coast. If realty/home builders did not force the government to help who would purchase a building if it could be destroyed easily by Mother Nature? Years ago Hilton head did not have the amount of people building every where. Ruining the environment.
    Stop all building near water. With out government help maybe people can enjoy the water free of homes/buildings.

    by Ms ESD — April 9, 2014

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