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6Dec. 2013

Turning the Tide on Flood Insurance

I vividly remember watching the local news footage of Tropical Storm Irene’s destruction as heavy rains pounded our region on August 28, 2011. Throughout Western Massachusetts and parts of Vermont, rivers swelled to levels never seen before and roads and bridges were literally washed away. It wasn't long until my phone started ringing with calls from panicked clients. As an insurance agent, those are the worst of times.

A string of natural disasters in recent years has brought the issue of flood insurance to center stage as property owners, here and across the country, have worked to recover and rebuild. New legislation may further impact property owners who reside in flood zones, as well as those who plan to buy or sell property in a flood zone.

Insurance for homes located in flood zones is typically provided through the National Flood Insurance Program (NFIP), administered by the federal government. Private insurers have no interest in offering flood insurance because losses are catastrophic in nature and are virtually guaranteed to occur over a period of time. Homeowners, dwelling and business insurance policies all contain clearly written exclusions for flood (although flood is covered under the comprehensive portion of your auto policy).

Due to losses suffered from severe weather events like Tropical Storm Irene and Superstorm Sandy, the NFIP has been running at a significant deficit. In July 2012, the U.S. Congress passed the Biggert-Waters Flood Insurance Reform Act, calling on the Federal Emergency Management Agency (FEMA) to make sweeping changes to the NFIP. The new legislation requires the NFIP to raise rates to reflect true flood risk, meaning premium rates will increase for many policyholders over time.

Until now, homes built in flood zones prior to the enactment of stricter building codes qualified for a subsidized flood insurance premium. Newer homes built according to code were, in essence, subsidizing the costs of the older "grandfathered" homes. Under Biggert-Waters, policyholders owning older homes out of compliance will see 25% rate increases each year until premiums reach full-risk rates.

The new regulations also call for flood maps to be re-drawn, particularly in coastal areas that have been affected by storms. Some homeowners within two miles of the coast are seeing huge premium increases. Property owners fear that the new rates will hamper their ability to sell their homes or qualify for a mortgage.

This month, a bipartisan coalition of senators proposed a bill to delay the full implementation of the Biggert-Waters Act. The legislation recommends delaying premium increases for two years while FEMA conducts a more in-depth study on the affordability of flood insurance.

It is important to assess the potential for flood damage to your property. You can first find out if your property is located in a flood zone by clicking here.

Protecting yourself from flood damage, and preparing in case you do sustain damage, involves good general insurance practices:

• Don’t keep valuables in your basement.
• Take a thorough video of your home and its contents to help remember what is lost in the event of a

For more information about the National Flood Insurance Program, or the Biggert-Waters Reform Act, visit the official site of the NFIP: www.floodsmart.gov.

Please call is if you have questions about flood insurance or if you'd like to review your policy.


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