The national Flood Insurance Reform Act of 2012, The Flood Insurance Disaster, do your research......

Are you Aware? Are you Ready? What is it?

The National Flood Insurance Reform Act of 2012 WILL phase out all the subsidies for vacation homes, businesses and structures that flood repeatedly, that already existed when the original Flood Insurance Program began in 1968.

 The National Flood Insurance Program of 1968 was to control the soaring federal payouts for natural disasters, like 2005 hurricanes Katrina and Rita and Hurricane Sandy, just to name a few.   The communities that agreed to participate limited their growth, in return for residents living in flood prone areas could qualify for insurance underwritten and subsidized by the federal government. There is an estimated 20% of the 5.5 million flood policies nationwide are subsidized.  There are a certain percentage of these policyholders policies that pay subsidized premiums that are significantly below risk based rates.

 These subsidies were what kept the cost of the insurance down and affordable, for the property owner.

What does this mean for me, the property owner?

 This means that rates for those policies will rise, and some by tenfold or more. Primary homes with insurance subsidies may be exempt until the new flood-risk maps are issued for the area OR until the home is sold.  Newer homes that once met the criteria could also see rate increases when the new maps are issued. 

The problem?

The cost of carrying insurance for these type of properties will increase, but the issue being at significantly higher insurance rates. This is already causing home values to plunge and some homes not selling at all.  This will definitely affect the local economy in each of these communities or neighborhoods that is currently in the flood plain or put in flood plain, in the new maps.  In the Midwest Region of the United States, the river town communities have long been in decline and these reforms will accelerate that.  Atlantic Coast regions will also feel the effect as they are still recovering from Hurricane Sandy.  Congress has now placed the burden for the previous programs debt on policyholders now.

Congress passed last year this new reform to eliminate many of the subsidies that had put the program about $25 billion into debt. This was known as The National Flood Insurance Reform Act of 2012, but this reform has little compassion for the flood prone homeowner now. 

If you live in one of the flood prone areas, you will certainly start seeing an increase in premiums due to the new Reform Act of 2012. 

Here are the numbers I am hearing now, property owners of those older subsidized properties could see rate increases as high as 17% a year until they reach a level of their market risk while non-subsidized homes could still see a rate increase of 6 to 9% per year. If you are a Business owner or property owner and not sure if or how this will effect you, call and talk to your insurance agent to determine if your policy will be effected.

Content researched from various resources including:

Fox News, New York Times, FEMA and other resources.