The national program will be facing some alterations and this could impact the amount paid for coverage.
As today is the official start of the hurricane season and homeowners are being cautioned that there are some changes that are on the way for the National Flood Insurance program (NFIP) because it could impact the rates that they are paying.
This is especially true in areas of considerably higher risk, such as in the South of Florida.
The flood insurance claims that came swamping in following Superstorm Sandy made FEMA have to borrow $30 billion – with the approval of Congress – in order to ensure that NFIP would stay afloat over the massive amount of rising waters – and the damage that they caused. Craig Fugate, the chief of FEMA, discussed the borrowed funds at the Governor’s Hurricane Conference which was recently held in Fort Lauderdale.
The flood insurance program needed the funds for both present claims and those that could occur in the future.
Fugate explained that Congress “gave FEMA borrowing authority, not only for Sandy but also to make sure we had funds available to pay claims for future events.” Congress also gave its approval to the Flood Insurance Reform Act of 2012, which would make it possible to reduce discounts and to increase the rates.
The changes that have been made to NFIP will have an impact of about 37 percent of the Florida residents who purchase their flood insurance coverage through the program. The reforms – and therefore the rate changes – won’t be increasing during this hurricane season. This will provide homeowners and businesses with the opportunity to prepare.
However, they will become effective in January 2014, at which point the rates will increase by up to 10 percent per year. In Florida, this will impact over 2 million policies. Moreover, discounts for secondary homes will no longer be available, which means that the rates on those policies will rise by 25 percent.
Properties – both homes and commercial – for which there have been repeated claims will also see an increase in their flood insurance premiums by about 25 percent at that time.