New legislation was passed in 2012 that changes the the National Flood Insurance subsidies. Some changes are already in effect, and many are still to come. It is expected that around 5% of policies will be immediately effected by the Acts 2013 subsidy phase-out.
I will mention a few of these changes below, but if you would like to watch a great video presentation that outlines most of the changes, visit this link: http://vimeo.com/67835375
Effective October 1st, 2013
There will be a 25% yearly increase for the premiums in high-risk areas. This 25% increase will happen every year until the policy reflects as true risk. This applies to:
- Non-primary / secondary residences in a special flood hazard area.
- Property which has experienced severe or repeated flooding.
- Non-residential properties in a special flood hazard area.
Not every NFIP policy will be affected by the subsidy phase out. 80% of all NFIP policies are not subsidized. However, your premium is likely to go up sometime since the rate increase cap for insurance companies has been raised.
- Even though 80% of all NFIP policies are not subsidized, your policy will likely cost you more right away since policies are subject to a new reserve fund fee and a new capped annual increase.
- Full-risk rates will apply for properties that are not already insured.
- Full-risk rates will be charged on any NFIP Policy that has lapsed due to the deliberate choice of the policy holder.
Effective October 1st, 2014
- Discounts will phase out (including grandfathered rates). These will move to risk-based rates for most properties when the community adopts a new Flood Insurance Rate Map.
- All grandfathered rates may disappear by October 1st, 2014.
BW12 Enactment for Lenders
BW12 also incorporates new requirements for lenders. Lending regulators are in the process of initiating rules and regulations and new escrow requirements are expected to begin in 2014.