The National Flood Insurance Program (NFIP) was implemented to protect property owners financially from property damage caused by natural flood disasters. Recently, FEMA has made several changes to NFIP policies and reformed many rules with the Biggert Waters Act. As a North Carolina property owner or one where you may be affected by floods, it is essential for you to be aware of these changes and the effect that it may have on you.
All insurance policies backed by the National Flood Insurance Program that were written on or after October 31, 2012 will undergo a change in premium rates. Premium rates will be increased by an average of ten percent. Dependent upon which Flood Zone your property is located, premium rate increases may be below average or more. The new premium rates will truly reflect the potential flood risk of homes and business establishments. What does that mean?
1. Buildings Below Base Elevation Level Will See Higher Premiums
FEMA has been instructed to no longer give premium discounts to structures that are below base flood elevation levels, even if they were originally up to code when built. In some areas, base flood elevation requirements will be rising dramatically.
2. Subsidies and Discount Rates Will Eventually Be Discontinued
Throughout the years, the National Flood Insurance Program has given real estate owners with buildings that are too low in flood zones due to circumstances that were out of their control, breaks on their premium rates. This was allowed in cases such as:
– When a building was built prior to 1975 or before the participating community received its first Flood Insurance Rate Map. Properties like these are insured at pre-firm rates unless the property owner proves through an official elevation survey that the building is within the required elevation requirements.
– If a policy was purchased before the effective date of a new map change, the policy holder is able to keep the prior zone and base elevation level. So, if a building was constructed based on a specific firm, the owner is able to purchase a policy based on that firm’s zone and base flood elevation.
Under the new reform that will soon take effect and NFIP, policies that are purchased will have to be based on the current firm of the jurisdiction the building resides in. These subsidies will come to an end with the implementation of the Big Waters Act.
3. Higher Annual Increases and New Zone Maps
Annual increases were limited by ten percent now that limit has been increased to twenty percent. Also, new zone maps will be created for all states and jurisdictions which mean that buildings may be in flood zones they weren’t previously in.
What Effect Will This Have?
– The Biggert Water Acts will definitely affect outer bank realty companies trying to sell property located in high risk flood zones.
– Homeowners rebuilding or after storm devastation will have to consider the financial implications of rebuilding under NFIP new regulations.
– This reform can cause economic hardships for the shore communities in North Carolina.
If you are a property owner or if you are looking to purchase a home through the help of an Outer Banks realtor, you should be informed about issues that will affect you and your property in order to make educated decisions about your future.
About the Author
Michael Lancsek is the owner of a real estate company and is also a broker. He specializes in helping buyers and sellers interested in Outer Banks realty.