On April 1, 2015 and April 1, 2016, the National Flood Insurance Program (NFIP) saw its first rounds of significant premium increases in years. And like clockwork, April 1 just passed and more increases are set for NFIP consumers. Overall, the entire program will see average 5.4% increase, but residents of Pinellas County may see much higher premiums.
As we have mentioned in prior blogs, many of the homes built in Pinellas County were built prior to the Flood maps (prior to 1974), so the homes were not required to be elevated to comply with NFIP & construction regulations. These policies are considered “Pre-FIRM” since they were built prior to the Flood Insurance Rate Maps (FIRMs). Many of these homes are considered “negatively elevated,” which means the lowest floor is lower than the base flood elevation (the 100-year flood elevation). Most of these homes are receiving significantly reduced premiums, but due to changes implemented by the NFIP under the Biggert-Waters Flood Insurance Reform Act (BW-12) and the Homeowners Flood Insurance Affordability Act of 2014 (HFIAA), they will continue to receive year over year increases until their premium matches the “actuarial rate.”
April 1, 2017 Increases
It’s important to note that all increases comply with the BW-12 of 2012 and HFIAA premium increase guidelines & caps which I have mentioned below:
- 25% increase annually for non-primary residential properties, business properties, severe repetitive loss properties, and substantially damaged/substantially improved properties
- 5% average annual increase for all Pre-FIRM subsidized policies (that are not severe repetitive loss or substantially improved/substantially damaged properties)
- 18% cap for all other risk classes besides those properties listed in bullet 1
Below is a summary of the average premium increases based on the corresponding Flood zone. The high velocity zone (V zone) rates are increasing even on Post-FIRM construction due to recent erosion studies which indicate that the premiums currently being charged currently underestimate the true risk.
- V Zones
- Pre-FIRM Primary Residence: 5%
- Post-FIRM Primary Residence: 7%
- Pre & Post FIRM Non-Primary Residences: 21%
- AE & A1-A30 Zones
- Pre-FIRM Primary Residence: 5%
- Post-FIRM Primary Residence: 1%
- Pre & Post FIRM Non-Primary Residences: 21%
- AO, AH, AOB, & AHB Zones
- Pre-FIRM Primary Residence: 5%
- Post-FIRM Primary Residence: No Change
- Pre & Post FIRM Non-Primary Residences: 21%
- X Zones
- Standard Rated Policies: 1%
- Preferred Risk Policies: No Change
With time & these continual increases to the NFIP, the private flood market has continued to develop and has turned into a viable option which most mortgage companies will accept. There are some downsides as noted in our recent blog, but there are also many positives, such as higher building coverage, higher contents coverage, replacement cost on contents option (not actual cash value) no waiting period, loss of use/rents coverage, and much more.
If you are interested in knowing about your options please contact your agent or email Brian T. Ford, CPCU at Bford@InsuranceResourcesLLC.com
