On Jan. 30, 2014, the United States Senate voted 67-32 to approve the Homeowner Flood Insurance Affordability Act (S. 1926), sponsored by Senators Menendez (D-NJ) and Isakson (R-GA).
This bipartisan legislation, an NAR member priority, calls for a 4-year timeout on rate increases triggered either by a property’s sale or a flood map update for a property with previously grandfathered rates. NAR provided Congress with expert testimony suggesting that many of these increases are excessive and inaccurate. The bill also creates a flood insurance advocate within the Federal Emergency Management Act (FEMA) to investigate home owner complaints of multiple different or excessive rate quotes.
The Senate vote sends the measure to the House of Representatives, where Reps. Grimm (R-NY) and Waters (D-CA) have already built an impressive list of 181 co-sponsors in favor of the bill; a total that is 30 votes shy of a House majority NAR will redouble its efforts there to persuade the House leadership to bring a similar bill up for a floor vote at the earliest opportunity
Source:Realtor.com
Showing posts with label flood insurance. Show all posts
Showing posts with label flood insurance. Show all posts
Flood Insurance Rate Uncertainty
Realtors® and homeowners across the country have been reporting
significant increases in annual premium rates before NFIP rate changes
took effect on October 1; this is raising concerns among consumers and
Realtors® about decreased property values and a stalled housing market
recovery.
Ed Connor, FEMA deputy associate administrator, Insurance, Federal Insurance and Mitigation Administration, said Congress took action to reform the NFIP and make it financially sound following several devastating storms.
“The last two major storms, Hurricane Katrina in 2005 and Hurricane Sandy in 2012 were the costliest storms in U.S. history,” Connor said. “Last year, the NFIP was forced to borrow money from Treasury; program debt is now $24 billion dollars.”
Flood insurance rates are dependent on risk levels, property type and location. Under the Biggert-Waters Flood Insurance Reform Act, rate increases for older primary residences go into effect when the policy lapses, the property is sold or a new policy is purchased.
Rates for commercial properties and non-primary residences are increasing by 25 percent per year until premiums reach the full actuarial cost. Changes to flood insurance rate maps in some communities may also affect the timing of increases, and some could go into effect immediately.
“This isn’t going to affect property owners in every state to the same degree,” said Thomas Hayes, FEMA chief actuary, Federal Insurance and Mitigation Administration. “There are going to be some counties that are harder hit than others; it’s going to depend on the location of the property and several other factors.”
Panelists told attendees that under the Biggert-Waters Flood Insurance Reform Act of 2012, homeowners could save $75,000 or more over 10 years if they build three feet above base flood elevation. Panelists also encouraged policy holders to talk to an insurance agent about their options and to obtain an elevation certificate.
NAR is a strong supporter of the NFIP and believes it is critically important to Americans and the nation’s economy since it increases the number of self-insured properties and reduces the cost of post-flood disaster governmental assistance. However, due to the unprecedented scope of premium increases, NAR recommends that FEMA take interim measures to ensure that the NFIP continues on a path towards financial solvency and actuarial responsibility without damaging the real estate recovery.
In addition to delaying future premium increases until FEMA submits its affordability study, NAR recommends that FEMA issue proposed regulations for installment payments and appeals reimbursement; and that FEMA work to improve and publicize the Community Rating System program, which encourages community floodplain management activities that exceed NFIP’s minimum requirements, and rewards participating communities with lower premiums.
Other NAR recommendations include streamlining and improving the process for obtaining property elevation certificates, and improving and publicizing information and education resources for consumers, real estate agents, lenders, and insurers, among others.
NAR also calls on FEMA to convene a summit about the impact of premium increases on property owners. At the summit, industry experts could develop valuable recommendations for how FEMA could minimize the impact of future premium increases, strategize ways to help property owners and communities lower their rates, and discuss ways the real estate industry can partner with FEMA on those efforts.
Source:The National Association of Realtors®
Ed Connor, FEMA deputy associate administrator, Insurance, Federal Insurance and Mitigation Administration, said Congress took action to reform the NFIP and make it financially sound following several devastating storms.
“The last two major storms, Hurricane Katrina in 2005 and Hurricane Sandy in 2012 were the costliest storms in U.S. history,” Connor said. “Last year, the NFIP was forced to borrow money from Treasury; program debt is now $24 billion dollars.”
Flood insurance rates are dependent on risk levels, property type and location. Under the Biggert-Waters Flood Insurance Reform Act, rate increases for older primary residences go into effect when the policy lapses, the property is sold or a new policy is purchased.
Rates for commercial properties and non-primary residences are increasing by 25 percent per year until premiums reach the full actuarial cost. Changes to flood insurance rate maps in some communities may also affect the timing of increases, and some could go into effect immediately.
“This isn’t going to affect property owners in every state to the same degree,” said Thomas Hayes, FEMA chief actuary, Federal Insurance and Mitigation Administration. “There are going to be some counties that are harder hit than others; it’s going to depend on the location of the property and several other factors.”
Panelists told attendees that under the Biggert-Waters Flood Insurance Reform Act of 2012, homeowners could save $75,000 or more over 10 years if they build three feet above base flood elevation. Panelists also encouraged policy holders to talk to an insurance agent about their options and to obtain an elevation certificate.
NAR is a strong supporter of the NFIP and believes it is critically important to Americans and the nation’s economy since it increases the number of self-insured properties and reduces the cost of post-flood disaster governmental assistance. However, due to the unprecedented scope of premium increases, NAR recommends that FEMA take interim measures to ensure that the NFIP continues on a path towards financial solvency and actuarial responsibility without damaging the real estate recovery.
In addition to delaying future premium increases until FEMA submits its affordability study, NAR recommends that FEMA issue proposed regulations for installment payments and appeals reimbursement; and that FEMA work to improve and publicize the Community Rating System program, which encourages community floodplain management activities that exceed NFIP’s minimum requirements, and rewards participating communities with lower premiums.
Other NAR recommendations include streamlining and improving the process for obtaining property elevation certificates, and improving and publicizing information and education resources for consumers, real estate agents, lenders, and insurers, among others.
NAR also calls on FEMA to convene a summit about the impact of premium increases on property owners. At the summit, industry experts could develop valuable recommendations for how FEMA could minimize the impact of future premium increases, strategize ways to help property owners and communities lower their rates, and discuss ways the real estate industry can partner with FEMA on those efforts.
Source:The National Association of Realtors®
Demystifying Flood Insurance
Myth #1: Hurricanes, not floods, are the No. 1 natural disaster and cause the biggest economic losses in the United States.
Hurricanes grab the headlines, but because floods happen in virtually every part of the country, they cause more losses than any other type of natural disaster. Homeowners insurance doesn’t cover floods. Only flood insurance covers flood damage to your home.
What causes floods?
- Rising rivers
- Storms
- Early snowmelts
- Man made problems from the construction of roads, shopping malls, homes, and industrial complexes
- Hurricanes
Nope. You must buy flood insurance only if yo
u meet all three of these criteria:
u meet all three of these criteria:
- You buy a home in a special flood hazard area where there’s a 1% chance of flooding in any year.
- Your community participates in the National Flood Insurance Program.
- You buy or refinance your home using a loan from a federally regulated financial institution, or a Fannie Mae- or Freddie Mac-guaranteed loan.
Myth #3: Flood insurance is always expensive
Flood insurance through the National Flood Insurance Program is sometimes expensive and sometimes cheap, depending on your home’s value, location, and height off the ground, as well as the value of your possessions.
- It can cost more than $8,000 a year if you buy the highest possible coverage of $250,000 for property and $100,000 for contents for a second home in the highest-risk areas.
- It can cost as little as $129 a year for $20,000 of rebuilding coverage and $8,000 in contents for your main home, if it’s in a low-risk area.
- $7,173 in a high-risk coastal area.
- $3,289 in a high-risk area.
- $1,798 a year in a low-to-moderate-risk area.
The NFIP doesn’t spend any tax dollars. The government sets the
premium rates high enough to cover flood insurance claims and operating
expenses in an average historical loss year. The program can borrow
money from the U.S. Treasury when losses are heavy, but has to pay those
loans back with interest.
To make sure it stays solvent, the NFIP is:
To make sure it stays solvent, the NFIP is:
- Phasing out subsidies for second and vacation homes and homeowners..
- Improved the accuracy of flood maps.
Private flood insurance is very expensive and only a handful of
companies offer excess flood insurance to homeowners with whose homes
are valued at more than $250,000. The National Flood Insurance Program
is the only program offering low- and middle-income homeowners flood
insurance. If it disappeared, those homeowners wouldn’t have another
option.
Source: HouseLogic - Surprising Facts About Flood Insurance By: Dona DeZube Read more: http://www.houselogic.com/home-advice/disaster-insurance/flood-insurance-facts/7/. Visit HouseLogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®
Source: HouseLogic - Surprising Facts About Flood Insurance By: Dona DeZube Read more: http://www.houselogic.com/home-advice/disaster-insurance/flood-insurance-facts/7/. Visit HouseLogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®
Update on the National Flood Insurance Program
Changes are coming to the critically
important National Flood Insurance Program that could impact real estate
transactions and property owners across the country. That’s according
to experts from the Federal Emergency Management Agency (FEMA), which manages the government’s flood insurance program, who spoke to REALTORS® at the Flood Insurance 101 session during the REALTORS® Midyear Legislative Meetings & Trade Expo.
Kristin Robinson, senior advisor, summarized last year’s Biggert-Waters Flood Insurance Reform Act, which reauthorized the critically important NFIP through 2017 so property owners would have access flood to insurance.
The National Association of REALTORS® strongly supported the legislation and believes the government’s insurance program saves taxpayers property and money because it increases the number of self-insured properties and reduces the cost of post-flood disaster governmental assistance.
The NFIP is responsible for writing and renewing flood insurance policies for more than 5.6 million home and business owners in more than 21,000 communities nationwide where flood insurance is required for a mortgage.
Before Congress passed the legislation, the program operated under short-term extensions. In the past five years, there were 18 extensions and several lapses in program coverage, delaying or cancelling thousands of real estate transactions daily according to NAR’s own research, wreaking havoc on real estate markets. Robinson said the NFIP is $24 billion in debt following several disastrous storms in recent years since the costs and consequences of flooding continue to increase. “For decades the program has made flood insurance available at subsidized rates that did not reflect the true risk of flooding; artificially low rates and discounts are no longer sustainable,” she said.
Andy Neal, actuary, addressed the gradual phase-out of subsidized rates, which was included in last year’s legislation to preserve the flood insurance program and critically important property insurance coverage for the nation’s homeowners. Neal said rate subsidies are being phased out over the next several years to help increase the NFIP’s soundness and financial stability.
The majority of policyholders, more than 80 percent, are not subsidized and won’t be impacted by subsidized rate changes since they are already paying full actuarial rates, he said. However, these owners could see routine annual rate increases.
“Only about 20 percent of NFIP policies receive subsidies, mostly older structures built before the community’s first flood insurance rate map was issued, which are known as pre-FIRM properties. Some of these policyholders will be impacted by the gradual phase-out of subsidized rates; an even smaller number will see immediate changes to their insurance policy rates,” said Neal.
Rate changes are likely to affect owners of subsidized pre-FIRM non-primary residences, business properties, and properties that have experienced severe repetitive flood losses. Owners of some pre-FIRM condos and multi-family units will also see their rates gradually increase. Owners of pre-FIRM primary residences will retain their subsidies unless the policy lapses; it suffers a severe, repeated flood loss; or it’s sold to a new owner, which is retroactive to July 6, 2012, when the legislation was enacted. Some grandfathered principal residences will also lose their subsidies over a several year period, but not until the communities’ flood map is revised.
Neal recommended that home and property owners talk to their insurance agent to determine if their property is currently being subsidized. He said flood insurance rates vary based on a property’s location, elevation and flood risk and can be as low as a few hundred dollars up to $10,000 or more if the property is well below flood level and had severe repeated flood losses.
While higher rates may place a greater burden on families, there are investments homeowners can make to either reduce or better access their flood risk so they can continue to protect their families and possessions from damaging floods. According to Neal, homeowners can lower their risk by elevating their property and potentially reduce their flood insurance rates by having an elevation certificate completed to determine the property’s elevation relative to the base flood elevation. Elevation certificates can cost several hundred dollars to complete but could potentially lower homeowners’ flood insurance premiums.
Some homeowners with flood insurance policies have already received quotes for higher rates, which may be caused by several other factors such as improvements to mapping. As FEMA improves its mapping technology and draws more accurate flood maps, some homes may now be located in a flood zone, or a higher risk zone, where flood insurance is more expensive. Also, some insurance agents may adjust rates to correct previous mistakes made about the home’s features when they are re-evaluating an insurance policy at renewal.
Source:Realtor.org
Kristin Robinson, senior advisor, summarized last year’s Biggert-Waters Flood Insurance Reform Act, which reauthorized the critically important NFIP through 2017 so property owners would have access flood to insurance.
The National Association of REALTORS® strongly supported the legislation and believes the government’s insurance program saves taxpayers property and money because it increases the number of self-insured properties and reduces the cost of post-flood disaster governmental assistance.
The NFIP is responsible for writing and renewing flood insurance policies for more than 5.6 million home and business owners in more than 21,000 communities nationwide where flood insurance is required for a mortgage.
Before Congress passed the legislation, the program operated under short-term extensions. In the past five years, there were 18 extensions and several lapses in program coverage, delaying or cancelling thousands of real estate transactions daily according to NAR’s own research, wreaking havoc on real estate markets. Robinson said the NFIP is $24 billion in debt following several disastrous storms in recent years since the costs and consequences of flooding continue to increase. “For decades the program has made flood insurance available at subsidized rates that did not reflect the true risk of flooding; artificially low rates and discounts are no longer sustainable,” she said.
Andy Neal, actuary, addressed the gradual phase-out of subsidized rates, which was included in last year’s legislation to preserve the flood insurance program and critically important property insurance coverage for the nation’s homeowners. Neal said rate subsidies are being phased out over the next several years to help increase the NFIP’s soundness and financial stability.
The majority of policyholders, more than 80 percent, are not subsidized and won’t be impacted by subsidized rate changes since they are already paying full actuarial rates, he said. However, these owners could see routine annual rate increases.
“Only about 20 percent of NFIP policies receive subsidies, mostly older structures built before the community’s first flood insurance rate map was issued, which are known as pre-FIRM properties. Some of these policyholders will be impacted by the gradual phase-out of subsidized rates; an even smaller number will see immediate changes to their insurance policy rates,” said Neal.
Rate changes are likely to affect owners of subsidized pre-FIRM non-primary residences, business properties, and properties that have experienced severe repetitive flood losses. Owners of some pre-FIRM condos and multi-family units will also see their rates gradually increase. Owners of pre-FIRM primary residences will retain their subsidies unless the policy lapses; it suffers a severe, repeated flood loss; or it’s sold to a new owner, which is retroactive to July 6, 2012, when the legislation was enacted. Some grandfathered principal residences will also lose their subsidies over a several year period, but not until the communities’ flood map is revised.
Neal recommended that home and property owners talk to their insurance agent to determine if their property is currently being subsidized. He said flood insurance rates vary based on a property’s location, elevation and flood risk and can be as low as a few hundred dollars up to $10,000 or more if the property is well below flood level and had severe repeated flood losses.
While higher rates may place a greater burden on families, there are investments homeowners can make to either reduce or better access their flood risk so they can continue to protect their families and possessions from damaging floods. According to Neal, homeowners can lower their risk by elevating their property and potentially reduce their flood insurance rates by having an elevation certificate completed to determine the property’s elevation relative to the base flood elevation. Elevation certificates can cost several hundred dollars to complete but could potentially lower homeowners’ flood insurance premiums.
Some homeowners with flood insurance policies have already received quotes for higher rates, which may be caused by several other factors such as improvements to mapping. As FEMA improves its mapping technology and draws more accurate flood maps, some homes may now be located in a flood zone, or a higher risk zone, where flood insurance is more expensive. Also, some insurance agents may adjust rates to correct previous mistakes made about the home’s features when they are re-evaluating an insurance policy at renewal.
Source:Realtor.org
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