Flood Insurance 101 - What You Need to Know
If you live or work in a coastal community, then, no doubt, you've been personally affected by the widespread uncertainty surrounding increases in flood insurance premiums.
|President Obama Signs Flood Bill Into Law|
On March 21, 2014, President Obama signed the “Homeowner Flood Insurance Affordability Act” into law. This law repeals FEMA’s authority to increase premium rates at time of sale or new flood map, and refunds the excessive premium to those who bought a property before FEMA warned them of the rate increase. The bill limits premium increases to 18% annually on newer properties and 25% for some older ones. Additionally, the bill adds a small assessment on policies until everyone is paying full cost for flood insurance.
Sourced from NAR Issue Brief (updated March 7, 2014), there are two noteworthy changes:
The new law will allow for grandfathering (allowed to keep the lower rate) of "Pre-Firm" properties (Pre-Flood-Insurance-Rate-Map properties - in the Town of Hempstead (Nassau County) that would mean homes built before the first FEMA map of April 16th, 1979).
Also, there can be an assumption of policy by the new buyer.
High-cost areas - anywhere in a flood map where there is more than a 1-in-4 chance a property will flood over a 30-year mortgage, (AE or V for velocity), flood insurance is required.
Low-cost areas - everywhere else on the map (x zone), flood insurance is not required for a federally backed mortgage (GSE, FHA, VA, etc.)
Over the next few years, FEMA will conduct an affordability study.