National Flood Insurance Program: What the Changes Mean for Historic Property Owners
New changes to the National Flood Insurance Program (NFIP) went into effect on April 1st of this year. These changes happened due to the fact that the NFIP is currently $28 Billion in debt. The new changes consist of increased premiums, surcharges and fees to policyholders. Simply put, they need to raise reserve funds. For decades, the NFIP made flood insurance available at subsidized rates that did not reflect the true risk of flooding. After the recent major storms, funds have depleted and it’s now time to budget for future storms, which are bound to happen.
A few things to keep in mind regarding the new changes with the program:
- For new and renewing policies, there is a $25 surcharge for primary homeowners and a $250 surcharge for non-primary homeowners. A non-primary residence is defined as living at the property for less than 50% of the time.
- All premiums are going up: Depending on the property’s size and location, annual premiums could spike and that with added fees and surcharges, policyholders are looking at an annual increase of around 10% over the next five years. Premiums cannot increase more than 18% a year for primary residence policies and 25% for secondary residences or properties. Ultimately, all flood zones are going up and to confirm, everyone lives in a flood zone, some are just higher hazard than others.
- Flood maps are changing: If you purchase a policy before a new map’s effective date, you can lock in a rate at the previous zone level. This will not prevent rate increases, but it may slow the rate at which the increases happen.
- Higher deductibles are available: The residential deductible limit is now $10,000. A higher deductible helps to lower the premium, but limits do have to be pre-approved by banks. With a $10,000 limit, flood insurance becomes a catastrophic insurance policy.
- Grandfathered rates will be phased out in 2016.
The changes are putting more responsibility on the policyholder. Lapses in policies could result in properties being subject to a full risk rating and a substantial premium increase. They may also be required to obtain a costly property elevation survey to justify their location.
It’s important to understand that in the past 5 years, all 50 states have experienced floods or flash flooding. Everyone lives in a flood zone; some are just higher risk than others. This makes it hard to reduce your risk, but that’s what insurance is for. If maintained properly, it lessens the severity of a potential loss. Recent changes to the NFIP program affect everyone, including historic properties and districts. Since no area is immune to the increased disasters and it is important to maintain the proper insurance coverage to lessen the blow of a major storm, costs have gone up.
Historic properties are exceptional and many are one of a kind, so they won’t benefit from having a one size fits all solution when it comes to coverage. National Trust Insurance Services prides itself in being the insurance resource for historic property owners and preservation organizations. Created in 2004 to address the growing issues and concerns regarding proper insurance coverage for historic properties and the organizations that work to maintain them, National Trust Insurance Services continues to offer insurance expertise in the preservation community. We offer coverage options that exceed the NFIP’s standard limits and we can provide recommendations on the right coverages for your property as it relates to flood zones and current coverages. Contact us for more information at [email protected] or call 866.269.0944. With the changes in the NFIP and the increased costs, it is important you know what you are paying for; let us help answer your questions.
Additional resources:
To receive a Flood Risk Profile for your property click here.
For information about what to do before, during and after a flood click here.
All states have a Department of Insurance where you can file complaints regarding your insurance coverages and claims outcomes. For more information about contacts for your state you can read more here.