Provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) require the NFIP to raise insurance rates for some older properties in high-risk areas to reflect true flood risk.
The affected properties are among those built before the community joined the NFIP and adopted its first Flood Insurance Rate Map (FIRM). Communities began joining the NFIP in the late 1960s. To find out when your community joined, contact your local floodplain manager. Properties built before that date and not improved since are known as "pre-FIRM."
Many of the pre-FIRM properties in high-risk areas do not meet current standards for construction and elevation, and they have been receiving subsidized rates that do not reflect their actual risk. The subsidized rates are being eliminated in some cases, as noted in the chart below. Some current policyholders and all future policyholders owning pre-FIRM properties in high-risk areas will pay rates based on their full risk of flood damage. However, most NFIP-insured properties (80 percent or more) are not affected by the changes.
|For These Pre-FIRM Properties With Newly Issued Policies||Subsidized Rates Are Eliminated|
|Recently purchased pre-FIRM buildings in high-risk areas|| Policies for newly purchased pre-FIRM buildings are issued at full-risk rates. Policies that were issued at subsidized rates for pre-FIRM buildings purchased on or after 7/6/2012 renew at full-risk rates starting 10/1/2013.|
|Policies issued for the first time on buildings in high-risk areas|| New policies are issued at full-risk rates. Pre-FIRM subsidized policies first in effect on or after 7/6/2012 renew at full-risk rates starting 10/1/2013.|
|Policies re-issued after a lapse on pre-FIRM buildings in high-risk areas|| Policies are reinstated at full-risk rates. Lapsed policies reinstated on or after 10/4/2012 and before 10/1/2013 will renew at full-risk rates.|
|For These Pre-FIRM Properties Paying Subsidized Rates|| Subsidized Rates Are Moving to Full-Risk Rates|
|Non-primary residences (secondary or vacation homes or rental properties) in high-risk areas|| 25% annual increases at policy renewal until premiums reach full-risk rates for policies in effect before 7/6/2012. If a pre-FIRM property is sold, the new owner pays full-risk rates.|
|Non-residential/business buildings in high-risk areas||25% annual increase at policy renewal until premiums reach full-risk rates for policies in effect before 7/6/2012. If a pre-FIRM property is sold, the new owner pays full-risk rates.|
|Previously flooded residences in high-risk areas|| 25% annual increases at policy renewal for severely or repetitively flooded properties of 1 to 4 residences until premiums reach full-risk rates for policies in effect before 7/6/2012. If a pre-FIRM property is sold, the new owner pays full-risk rates.|
|For Other Property Types ||Subsidized Rates Do Not Apply or Can Continue|
|Pre-FIRM primary residences in high-risk areas|| Subsidized rates continue when policies are in effect before 7/6/2012 until or unless:
- Property is substantially improved;
- Property of one to four residences incurs severe, repetitive losses or receives insurance payments that exceed the property's value
- Property is sold (the new owner pays full-risk rates); or
- Policy is allowed to lapse.
|Newer post-FIRM residences in high-risk areas|| Not affected; already paying full-risk rates.|
|Residences in moderate- to low-risk areas|| Not affected; properties in these areas (shown as B, C, or X zones on flood maps) do not pay subsidized rates.|
Note: Discounted, lower-cost rating options for properties affected by flood map changes (Grandfathering; Preferred Risk Policy Eligibility Extension) are not affected by the removal of pre-FIRM subsidies. Policyholders can continue paying rates based on the risk shown on the previous flood map until Section 100207 of BW-12 is implemented.
The best way to determine exactly how your property and insurance premiums will be affected by changes to subsidies is to talk with your insurance agent.
PRIMARY RESIDENCE DISCLAIMER
For flood insurance rating purposes, a primary residence is a building that will be lived in by the insured or the insured's spouse for at least 80 percent of the 365 days following the policy effective date. If the building will be lived in for less than 80 percent of the policy year, it is considered to be a non-primary residence.