Major Change in National Flood Insurance Program (NFIP)

On 10/1/2013, the major changes were made to the NFIP. Some of the changes are as follows:

  • All new and renewal premiums are being increased an average of 10%.
  • 5% of those policyholders with heavily subsidized rates will see an immediate annual increase of 25% until the rates are no longer subsidized.
  • This consists of pre-firm structures (those that were built prior to the initial flood map for the community) of businesses, non-primary residences and those that have incurred major or severe repetitive flood claims in the past.
  • In V zones, rate increases will range from 11% to 17%.
  • In A zones, rate increases will range from 6% to 16%.
  • In X zones, rate increases will range from 1% to 8%.
  • A new 5% premium tax will be applied on all policies except Preferred Risk Policies to help build a reserve fund for the NFIP
  • The Federal Policy Fee will increase slightly.
  • A 30 day waiting period will now apply to all new submissions where there is going to be a loan on a structure that is in a special flood area.

Currently, the grandfather procedure provides property owners the option of using risk data from a previous flood map if they meet certain criteria. Grandfathering rules will be eliminated for all new applications on pre-firm structures in most situations. A new provision will require the use of the revised flood risk data after a map revision. The legislation provides a 5 year mechanism to phase-in the new rates. This provision impacts the grandfather procedure and will be implemented in the latter half of 2014. The details of the implementation are under development.

At this writing, additional studies are being conducted to address issues of affordability, privatization, reinsurance and other topics.

Please call your Lutgert Insurance agent to discuss how the new law will affect your individual situation.


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