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Florida Insurance Law Blog

Federal Government Calls for Decreased Flood Insurance Premiums

In mid-March, the federal government passed a bill repealing a provision it made just two years ago that established huge flood insurance premium increases for Florida property owners with homes on or near the coast. The 2012 provision, which called for sweeping changes to the federal flood insurance program, is all but canceled out by the new revisions.

Homeowners along the Atlantic and Gulf coasts and flood plains were hit the hardest by the 2012 legislation that sought to wean homeowners off of government-funded rates, as the measure required a wide-scale review and update of the flood maps used to determine premiums. The amended maps indicated varying degrees of flood risk; homeowners in certain areas were threatened with a steeper increase in premiums than others, largely dependent on the flood risk of that particular location as determined by the government maps.

But why was the government trying to take the subsidized rates away from policy holders? They wanted to get the program back on solid ground, financially speaking, as CBS reported the national program is apparently $24 billion "in the red" due to significant losses from previous devastating weather events, most notably Hurricane Katrina and Superstorm Sandy.

The properties for which owners would've had to pay premium increases so steep they would essentially be unaffordable were originally built to code, and were only recently found to be at greater flood risk than previously indicated. These homeowners that were "grandfathered" into below-market premiums are subsidized by other policyholders- a "rate" which the March legislation preserves. Premiums that would have been increased to actuarially sound rates over five years under the 2012 reforms are capped at an 18-percent increase per year, according to the revisions. Under the 2012 law, home sales in older coastal communities throughout Florida and other states would have suffered due to prospective buyers likely being deterred from purchasing the property due to the particularly high premiums those areas would have been forced to pay under the 2012 law.

Supporters of the 2012 reforms said the revisions "continue to subsidize home ownership in risky, flood-prone areas and increases the odds of a future taxpayer bailout while requiring people in safer areas who carry flood insurance to subsidize below-market rates for homeowners benefiting from grandfathered rates," according to CBS.

While the White House did not issue an official policy statement on the measure, it noted it supports a phased-in transition to risk-based flood insurance rates, as that would help ensure that the federal flood insurance program has sufficient resources to pay future claims.

Under the recent revisions, the Federal Emergency Management Agency would retain the ability to increase premiums each year, yet not at the rate that they would have under the 2012 law. The March legislation calls for a $25 surcharge on each of 5.6 million policyholders would offset the cost of continued subsidies for about 1.1 million homeowners. Owners of second homes would pay a $250 surcharge.

In light of these changes, purchasing flood insurance may be an advisable decision for residents living along the Florida coast in Tampa and the surrounding areas. Retaining an experienced property insurance claim attorney to review your current or potential homeowners insurance and/or flood insurance policies could be the difference between you being liable for hundreds of thousands of dollars in damages due to flooding or storm surge that you thought were covered under your policy- and having your insurance company pay out on a claim. Don't let a misunderstanding of your policy lead to your possible financial devastation following a weather event- contact Pekar Law P.A. for information and assistance at 813-712-8762.

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