Take Note of Changes in Policy Rates Due to New National Flood Insurance Program (NFIP) Legislation
The Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) requires Federal Emergency Management Agency (FEMA) to take immediate steps to eliminate a variety of existing flood insurance subsidies and calls for a number of changes in how the program operates. The new rates will reflect the full flood risk of an insured building, and some insurance subsidies and discounts will be phased out and eventually eliminated. Rates on almost all buildings that are, or will be, in Special Flood Hazard Areas (SFHAs) will be revised over time to reflect full flood risks. Based on various conditions set forth in the law, subsidies and grandfathered rates will be eliminated for most properties in the future.
Effective on Jan. 1, 2013, flood insurance policy rates for some older non-primary residences in SFHAs that received subsidized rates based on their “pre-Flood Insurance Rate Map” (pre-FIRM) status will increase by 25 percent a year until they reflect the full-risk rate. A pre-FIRM building is one that was built before the community’s first flood map became effective and has not been substantially damaged or improved. If the building will be lived in for less than 80 percent of the policy year, it is considered to be a non-primary residence. The City of Grand Prairie enrolled in the National Flood Insurance Program (NFIP) Oct. 1, 1971, and the initial FIRM was published by FEMA on July 6, 1973, establishing the “Post FIRM” date for the City of Grand Prairie.
The NFIP will also begin eliminating subsidized premiums for other buildings effective on Aug. 1, 2013, as mandated by Section 100205 of BW-12. Key changes include:
- Subsidies will be phased out for severe repetitive loss properties consisting of 1-4 residences, business properties, and properties that have incurred flood-related damages where claims payments exceed the fair market value of the property.
- Properties with subsidized rates will move directly to full-risk rates after a sale of the property or after the policy has lapsed.
- New policies will be issued at full-risk rates.
Note that policyholders should be aware that allowing a policy to lapse could be costly. A new application will be required and full-risk rates will take effect.
Important Note on Preferred Risk Policies (PRPs)
As of Jan. 1, 2013, PRPs issued on properties located in a high-risk area may continue beyond the previously designated two-year period until FEMA completes analysis and implements a revised premium structure put in place with BW-12.
For some policyholders in areas flooded by Sandy, the impact of these changes could be substantial. For this reason, the Federal Emergency Management Agency (FEMA) encourages property owners to consider flood insurance costs when making decisions about how high to rebuild.
For More Information:
For the latest NFIP Bulletins about the implementation of these changes, visit www.nfipiservice.com/nfip_docs.html. For more details about flood insurance, visit FloodSmart.gov. Visit FloodSmart’s Community Resources section for tools and resources you can use to help you better communicate the risk of flooding and the importance of flood insurance.