When the Biggert-Waters Flood Act was passed last July, very few knew that it would take over a year for some of the major provisions of the bill to kick in. In fact, some of the changes were not even announced until almost a year after the bill passed, and less than 6 months from the time many of the provision go into affect. October 1st, 2013 is one of the dates where some major changes are set to go into affect.
There are a few provisions that go into affect as of Oct 1, but the ones that will affect the most people are the Elevation Certificate requirement on all Flood Insurance Policies, and the elimination of subsidized rates for Pre-FIRM (Flood Insurance Rate Map) homes. From here on out, Flood Insurance rates will be based on the actual elevation of the house (actuarial rate), no matter if it was built before or after the Rate Map was released in the mid-70’s. Until now, Pre-Firm homes were allowed to keep their subsidized rates. However, as of Oct 1, 2013, Non-Primary Homes (under 80% occupancy per year), will no longer be allowed to keep their subsidized rates, and will see an increase of 25% per year until the actuarial rate is achieved. The actuarial rate for a home is pre-set by the National Flood Insurance Program and is based on the elevation of the house, which is why Elevation Certificates are now required. Primary homeowners will get to keep their subsidized rates as long as they keep their policy. As of Oct 1, 2013, however, once they let the policy lapse, assign the policy, or for any new policy, the actuarial rate will begin from day one, and will not be phased in at the 25% per year pace.
But that news is not all bad, as in many cases, the actuarial rate is less expensive under the new law. For example, the actuarial rate before Biggert-Waters for a Single Story Pre-Firm home that is in an AE Flood Zone, is at Base Flood Elevation and without an Elevation Certificate is $3,600 per year. Under the new law, that same house will now have an actuarial rate of $1,815. If that same house is 4 ft above Base Flood Elevation, the actuarial rate under the new law will be $553 per year. So its important to get an Elevation Certificate to determine the Base Flood Elevation. In many cases, rates will not go up that much, if at all.
There are some other changes that take affect on Oct 1, 2013 as well. For example, all Business Owners that are using subsidized rates will now see a 25% rate increase per yer until the actuarial rate is achieved. The same goes for properties that are deemed to be severe repetitive loss properties, who have had sever flood damage multiple times. Also the limit on the amount rates can go up each year was raised from 10%-20%, plus there will be an additional 5% fee charged to all Flood Policies the set up a Reserve Fund.
It is very important to speak with your Insurance agent to determine the affect the changes will have on you. The best advice right now is to get an Elevation Certificate. Then you will get a true picture of what needs to be done, if anything, to keep your Flood Insurance rates low.