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On Jan. 1, 2013, the National Flood Insurance Program (NFIP) began phasing out the rate subsidies for the vast majority of older properties. The 2012 Biggert-Waters law (which extended the NFIP for 5 years) requires that subsidized rates increase in steps of 25% per year until the affected owners are paying the full cost for flood insurance. Passage of this law was essential to ensure that all properties, including second/vacation homes, would continue to have access to comprehensive coverage under the NFIP.
Some older property owners will spend more on flood insurance.
- Second/vacation home subsidies were the first to see the 25% step increase on Jan. 1
- Business properties, Severe Repetitive or High Loss properties, and properties with a substantial improvement or damage will go next and see the first step on June 1, 2013
- Properties Purchased or with Lapsed/New Insurance are no longer eligible for subsidies so these new policyholders will pay more for this insurance. Our latest information is that this provision will apply to all properties by the end of 2013, but we are awaiting an official bulletin from the NFIP.
Learn more about the Biggert-Waters law and what to say:
- FEMA’s 2013 Rate Schedule for second/vacation homes (which includes the first 25% step increase) (Note: Rates are per $100 of coverage)
- NAR’s summary of the broader set of reforms in Biggert-Waters
- NAR/FEMA’s joint brochure on WHAT TO SAY about flood insurance (Note: the lender is legally responsible for determining if flood insurance is required; the Write-Your-Own insurer calculates and quotes the insurance rate that is required by the new law)
NAR will continue to monitor implementation of the legislative reforms and keep you apprised of any major developments going forward.