Flood insurance premiums can go up after April 1

A bulletin released by the National Flood Insurance Program (NFIP) outlines changes in flood insurance rates after April 1, 2015, that are allowable under a law passed last year – the Homeowner Flood Insurance Affordability Act (HFIAA) that changed some details of the Biggert-Waters Act.

Both HFIAA and Biggert-Waters are complex documents, and it’s important to note that it’s difficult to know from general information how much a specific homeowner’s flood insurance policy could change.

For more information on categories of homeowners and how they might be affected, download the complete NFIP bulletin posted online.

Key changes

An individual’s rate premium cannot increase more than 18 percent; an “average rate class” of homeowners cannot have their premiums increase more than 15 percent.
Certain subsidized policyholders (those not currently paying the full actuarial rate) have mandatory rate increases.
Policies will have a new annual surcharge required under HFIAA.
New guidance will impact “substantially damaged and substantially improved structures,” and there is additional rating guidance on Pre-Flood Insurance Rate Map (FIRM) structures.
There will be a new procedure for Properties Newly Mapped into the Special Flood Hazard Area and existing Preferred Risk Policy Eligibility Extension (PRP EE) policies.

The changes take effect April 1 for both new business and renewals.

According to the bulletin, the 18 percent cap on flood insurance increases has a few exceptions that include, but are not limited to, misratings and increases in the amount of insurance coverage.

Another exception: Premiums on subsidized policies will increase 25 percent for policies on non-primary residences, Severe Repetitive Loss properties, and substantially-damaged/substantially-improved properties.

A 25 percent premium increase on business properties will be implemented in 2016.

New surcharge

HFIAA also introduces a new mandatory surcharge on all new and renewed policies – $25 for primary residences and $250 for all other policies.

The surcharge and a Federal Policy Fee (FPF) aren’t considered premiums, so they’re not considered in the maximum 18 percent increase for any specific homeowners. As a result, the total amount charged a policyholder could exceed 18 percent in some cases.

Premiums – including the Reserve Fund Assessment but excluding the FPF and the new HFIAA- mandated surcharge – will increase an average of 9.9 percent for policies written or renewed on or after April 1, 2015.

When the FPF and the new HFIAA-mandated surcharge are included, the total amount charged to a policyholder could increase a maximum of 19.8 percent.

Source: Florida Realtors