What is Going on with Flood Insurance?

It is definitely a hot topic today ever since the Biggert-Waters Flood Insurance Act was passed in July of 2012. It’s purpose was to put the National Flood Insurance Program (NFIS), which was hit hard by Hurricane Katrina, on stable ground.. It passed just months before Superstorm Sandy hit,putting

the program deep in debt.

The act reauthorized NFIS for five years. It also instructed the Federal Emergency Management Agency (FEMA) to begin phasing out subsidies and discounts, in order for premiums to more accurately reflect a property’s risk. What happened is that flood insurance premiums went up dramatically, jeopardizing real estate deals and scaring everyone deemed in a “flood zone.”

The National Association of Realtors, which supported Biggert-Waters, is now backing a new bill, the Homeowner Flood Insurance Affordability Act, that would delay premium increases for up to four years. During those four years,FEMA would be required to complete an affordability study and propose regulations that address affordability issues. Also time to redo the FEMA flood maps.

This is a huge deal in Massachusetts. About 51,000 Bay Area properties have national flood insurance, Anyone who owns a home or is considering buying one in a flood zone, should contact an insurance agent who sells flood insurance or their local engineers or building departments to see how the changes affect them. The changes are complicated and every house is unique depending on their home’s age, elevation, and location. If you do not carry a mortgage on your house, flood insurance is a choice. Most people who live in their homes as their primary residence and keep their policies current won’t see any changes immediately, but it will affect them if they decide to sell. Vacation or rental homes will see a much more dramatic increase in their rates with renewal and years after until they reach their full risk rate.

How does this affect us as realtors? Well , first of all backing the Homeowner Flood Insurance Affordability Act to buy a little bit of time for home owners and keeping abreast of the bill's progress. Also, buyers are very concerned if the piece of property they are looking at is in a flood zone and how much the premium will add to their expenses when purchasing the house. This could affect their pre-approval amount. Having a good relationship with a local insurance agent would help with these confusing questions. On the seller's side, this will affect the sale of the house since flood insurance can no longer be transferred except to family members. Also a vacation house will be hit harder with the increases than a primary residence. It can be very confusing, but helping our clients and talking to an insurance agent about a specific property may be able to answer many of their questions.