Anna Child Group
The below article was provided by the California Assn. of Realtors 11/8/2013. The price of elevation certificates are being quoted as high as $1,200 from what I have heard, but they can be bought for less and there are some private insurance companies offering flood insurance without elevation certificates. Email me for insurance agent referrals.
Flood Insurance Premium Increase
Effective October 1, 2013, subsidized flood insurance premiums are being phased out for certain properties that have not been elevated, but are located within a Special Flood Hazard Area. Additionally, starting last year, buyers of these properties are no longer being offered subsidized flood insurance premiums.
The subsidy for flood insurance premiums is being phased out under the recently enacted Biggert-Waters Act of 2012 to improve the fiscal soundness of the National Flood Insurance Program (NFIP). This law also requires a 5% assessment for all policies for a new Reserve Fund, although Preferred Risk Policies will not be assessed until an undetermined future date.
Current Policyholders: According to the Federal Emergency Management Agency (FEMA), 81% of current flood insurance policyholders are not affected by the subsidy phase-out as they do not pay subsidized rates. Most of the remaining 19% of policyholders have subsidized flood insurance premiums for older properties that have not been elevated, but are located in a Special Flood Hazard Area as designated by FEMA. An older property means a property built before the community adopted its first Flood Insurance Rate Map (FIRM). Most communities adopted their initial FIRM in the 1970s or 1980s.
Here’s the breakdown for the 19% of all policyholders with subsidized premiums, not all of whom will see higher premium costs. Only 5% of all policyholders will see premium increases starting in 2013. These policyholders are property owners who have been receiving subsidized policies for non-primary residences, businesses, or severe repetitive loss properties. Their premium increase will be limited to 25% per year until the premium reflects the property’s true risk. Another 4% of all policyholders with pre-FIRM condominiums and multifamily properties will see premium increases sometime in the future to be determined by FEMA. The other 10% of all policyholders have pre-FIRM primary residences, and will not see premium increases until their properties are sold or their policies lapse.
New Policyholders: Starting last year, subsidized insurance premiums are no longer being offered for new flood insurance policies, including newly purchased pre-FIRM properties in a Special Flood Hazard Area. Sellers generally disclose to their buyers in a Natural Hazard Disclosure Statement as to whether their property is located in a Special Flood Hazard Area. Buyers are also advised about the NFIP, and to look into obtaining insurance during the buyer’s inspection period, in C.A.R.’s standard form Buyer’s Inspection Advisory (Form BIA paragraph 11) and Statewide Buyer and Seller Advisory (Form SBSA paragraphs 16 and 31).
For new policyholders, an Elevation Certificate is needed to determine the true flood risk premium for a pre-FIRM property in a high-risk area.
Property owners without an Elevation Certificate should speak to their insurance agent, as well as review FEMA’s Homeowner’s Guide to Elevation Certificates.
For more information about flood insurance under the Biggert-Waters Act of 2012, visit FEMA’s website
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