Flood insurance premiums set to spike due to federal law
A federal law enacted in 2012 is beginning to have a significant impact on flood insurance rates in the U.S. The Biggert-Waters law was officially enacted just before the impact of Hurricane Sandy in 2012. The law requires premiums associated with policies under the National Flood Insurance Program to better reflect the risks associated with floods. This generally means an increase in premiums for the 5.6 million policies that the federal program represents.
Biggert-Waters law aims to mitigate losses for federal program
The law is meant to address the financial problems that the National Flood Insurance Program is facing. The federal program has seen more than $24 billion in losses over the past several years. These losses have put the program under significant financial stress and have limited its ability to manage claims associated with flood disasters. In the wake of Hurricane Sandy, claims processed through the National Flood Insurance Program were met with several delays due to the lack of funding that the program currently has.
Law requires homeowners to make renovations to their properties
The Biggert-Waters law is now beginning to push flood insurance rates to new heights. Per the law, policies are being reviewed based on the risks that exist with certain properties. Higher insurance rates are expected to be felt most by those in areas that are typically prone to floods, such as coastal communities located in states like Louisiana and Florida. According to the law, homeowners in risk-prone areas must make renovations to their properties in order to protect themselves from floods. If they fail to do so, homeowners could see their flood insurance rates reach $10,000 a year or more.
Higher flood insurance rates to hit vacation homes this year
Making renovations to a property to make it more resilient to floods is a costly endeavor. These renovations can cost homeowners tens of thousands of dollars depending on how extensive they need to be. The law does not only affect primary homes, of course, and also institutes requirements on vacation homes, which will be subject to flood insurance rate increases later this year.