In the United States, hurricane season is about to begin and many homeowners in South Florida are about to see the impact of changes to the National Flood Insurance program.
The National Flood Insurance Program (NFIP) was first created by congress in 1968 and enables communities to purchase flood insurance from the government. The insurance program was designed o provide an alternative source of insurance for communities who have difficulty obtaining insurance from other sources. The program insures over 5.5 million homes in the United States against flood damage.
After Hurricane Sandy caused so much damage in 2012, congress was forced to lend FEMA $30 billion dollars so they could keep the flood insurance program afloat. It is estimated that Hurricane Sandy was the 2nd most expensive hurricane to hit the USA, causing over $70 billion in damage, second only to Hurricane Katrina which created $108 billion in total damage.
The FEMA boss, Craig Fugate commented on the loan recently: “They gave FEMA borrowing authority, not only for Sandy but also to make sure we had funds available to pay claims for future events,”. Which should insure that the program continues in the forseeable future.
Congress approved the Flood Insurance Reform Act of 2012 which increases flood insurance rates for some areas, but also provides some discounts. Most of those affected by changes in the legislation are those in Florida, where the hurricanes frequently create a great deal of damage.
Some of the changes tha are going to occur include the removal of a discount for 2nd homes, which will raise those rates by 25%, and the average rate will increase by 10%. Homes that have had numerous flood insurance claims will also be paying more and flood prone commercially zoned buildings will also pay about 25% more. Politicians claim that these increases are required so the program can be sustainable and with climate change increasing extreme weather events like Hurricanes Sandy and Katrina, rate increase were the only way to keep the program alive.
Not all home owners are required to have flood insurance, so it is worth talking with an insurance agent to discover if it is compulsory in your area. However if you live in a flood prone area in Florida it is a significant risk. Some home owners have observed from past hurricanes that it is not flood damage that damages their properties, but the hurricane itself. If you did not flood from past hurricanes, you might be able to remove the payment from your insurance expenses.