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NFIP reforms causing ripple effect in South Florida

Fri Aug 30th, 2013 on     Insurance Law,    

The National Flood Insurance Program is a program managed by the Federal Emergency Management Agency, and Congress made some changes in 2012 that are prompting a big reaction in South Florida. Properties that are mortgaged and fall in a flood zone require flood insurance, and in Miami, that means a lot of people pay these premiums. In fact, 37 percent of all flood insurance policies cover properties in Florida, and 47,362 of those properties can be found in Miami-Dade County.

The reforms passed in 2012 include a requirement that insurance premiums more accurately match the properties true flood risk. Why? Congress wants to take the burden off of all taxpayers by removing subsidies that help keep the costs of insurance coverage down. For those that live in high-risk areas, such as homes that are found on the waterfront, they could face some very hefty rate increases.

While these increases are not scheduled to occur immediately but instead rise over time as the subsidies are phased out, this period isn’t very forgiving. Premiums are scheduled to increase by 25 percent per year until they match the designated risk level. For some on the coast, this could mean a premium that increases by 400 percent.

Many homeowners, real estate agents and even insurance industry experts are worried about the effect that this could have on property values, the housing market and entire communities most affected by floods.

Others are not quite as concerned. For many homeowners, this change could actually mean a reduction in their yearly bill. For instance, one Florida homeowner said that his home would no longer fall in a flood zone on the FEMA map and result in the elimination of current premiums. “I’m paying $1,100 to $1,200 a year for nothing,” he said. “This area will never flood.”

For another homeowner and insurance agent with a property that falls right in a high-risk area, she said that she doesn’t mind having to pay a little more. Right now, her insurance premium still falls under the $600 national average. She said that the FEMA flood insurance program would still provide the cheapest rates for badly needed protection.

Source: Sun Sentinel, “Many Floridians face rising tide of flood insurance costs,” William E. Gibson, Aug. 18, 2013

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