Flood insurance premiums to soar in NEPA because of change in how they are calculated [The Citizens' Voice, Wilkes-Barre, Pa.]
Jun. 25—A projected 600% increase in flood insurance may force
Her
"I have to see if I can pay it this year," said Yachna, who lives there with her 56-year-old disabled son, James. "If not, I don't know what I'm going to do."
She is among millions of homeowners nationwide insured through the National Flood Insurance Program who face dramatic premium spikes under a revised rating system the
Many are unaware of exactly how much their bills will rise, and experts worry the hikes will cause many to drop their insurance and risk costly consequences.
The analysis projects how much average premiums will increase by state, counties and ZIP codes.
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It is unclear why Yachna's rate will increase so much. It may be tied to her home being so close to a river and being flooded by tropical storms — Agnes in 1972 and Lee in 2011.
Yachna doesn't want to drop her coverage because her home flooded twice, but may have no choice
"It's getting tough," she said. "The gas is going up. The electric is going up. The water is going up."
Some local officials criticized
"These premium increases are outrageous, and it's the people who can least afford them who are being forced to pay,"
"A lot of people are going to lose their homes over it," Wilbur said. "How can you afford
A
Retired, he and his wife Paula, 66, live on a fixed income. Their home flooded in 2011. He now fears they may have to drop the insurance.
"We are keeping it for as long as we can afford it, but as we get older, it's going to be more difficult every year," he said. "At some point we may just have to roll the dice because it's cost-prohibitive."
He also worries about how the new flood insurance rates will affect their chances of selling their home if they ever decide to put it on the market.
"You are basically trapped here," he said. "The bank is going to require insurance. People won't be able to afford the mortgage and flood insurance."
Here is everything you need to know about the changed rating system:
Why is my rate increasing?
The hikes stem from
Properties now are assigned a "full-risk premium" that
Previously, properties were placed in a general risk category and evaluated by location within a flood zone on a Flood Insurance Rate Map (FIRM), occupancy type and elevation within a flood zone. That rating system did not take into account the individual flood risk or cost to rebuild, and considered just two sources of flood risk — river flooding and coastal flooding.
How much can my premium increase annually?
By law, increases for most residential properties with existing policies are capped at 18% a year and 25% for commercial properties. Premiums phase in, increasing by 18% each year (25% for commercial properties) until they reach the full-risk rate.
How long will it take to reach the full-risk premium?
On average,
Nationwide,
When did the new rate changes take effect?
In
Why did
To more accurately reflect the risk, and the agency's financial liability.
The National Flood Insurance Program (NFIP) sustained massive losses from catastrophic weather events, including Hurricane Katrina's devastation of
"It was a failing model because they are not charging enough for the risk," said
The change also makes the system more equitable. If your home's value is less than your neighbor's, your replacement cost is less and your premium should be too, Friedlander said.
"In the past, virtually everybody in the same neighborhood paid the same — regardless of what your replacement cost was," Friedlander said. "That is not a fair system."
How exactly is my rate calculated?
That largely remains a mystery.
How many policy holders will see an increase?
What if I'm a first-time policy buyer?
First-time buyers must immediately pay the current full-risk premium rate.
Buyers seeking to purchase a property with an existing policy should consider assuming it so they qualify for the phase-in period, said
"I tell agents to make sure you tell your clients that if the sellers have flood insurance that the buyer (needs to) takes over the policy to minimize the impact," she said.
Can I drop coverage?
It depends. Properties in high-risk flood zones with mortgages from government-backed lenders are required to have flood insurance. Many private lenders also require coverage in high-risk areas, but generally make it optional for homes in other flood zones. Property owners without a mortgage also do not have to carry flood insurance.
Experts urge existing policy holders to carefully consider the consequences of dropping coverage. Besides risking financial ruin should a flood hit, a policy holder who drops coverage and later wants to renew it would no longer qualify for the phase-in period that spreads out the full-risk premium increases annually.
Where do I find my full-risk premium?
Insurance companies that sell NFIP policies include the full-risk premium rate on the policy declaration page a policy holder receives after paying the premium.
However, the declaration page does not necessarily include an explanation of what the term means. Consumer advocates worry many people remain unaware of how much their policy will increase because of that.
"You might not even know what that full-risk rate line means and not recognize that eventually you are expected to pay that," said
Will the full-risk premium amount rise again?
The rates could increase further because of climate change causing more frequent and catastrophic weather events, said
Is anything being done to help property owners?
Legislators in several states want the federal government to offer subsidies to help low- to moderate-income property owners pay premiums.
In
I'm concerned about the new rating system. What can I do?
What can I do to reduce my rate?
Ensure the information
Consider reducing the amount of coverage on the building or contents and/or increasing deductibles. Property owners not mandated by their lenders to carry flood insurance can drop contents coverage for a substantial savings.
Look into purchasing coverage from a private insurance company instead of the NFIP.
"There are more companies writing flood insurance in the market than ever before," Friedlander said. "Nobody can guarantee you will do better ... but a competitive market typically leads to better pricing."
Encourage your municipality to take steps to be included in the Community Rating System program, which offers premium discounts ranging from 5% to 45% for properties in communities that exceed NFIP flood plain requirements. Properties in
Where can I get more information?
Tips for paying less for flood insurance: floodsmart.gov/how-can-i-pay-less
Contact the writer: [email protected]; 570-348-9137; @tmbeseckerTT on Twitter.
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(c)2023 The Citizens' Voice (Wilkes-Barre, Pa.)
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