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Health & Fitness

Flood Insurance, Understanding the Changes

There's been much written about the Biggert-Waters Flood Insurance Act of 2012. There's no question it will have a negative effect on real estate in our county. For homeowners living in Special Flood Hazard Areas (SFHAs) it will extremely painful if not in some cases impossible for them to pay the new non subsidized rates. Homes built before 1974 face the highest rate increases. These homes referred to as "Pre-FIRM" mean that they were built prior to the initial Flood Insurance Rate Maps. 

First some history. FEMA started the National Flood Insurance Program in 1968 to reduce flood related disaster costs. This program offered flood insurance to communities in exchange for floodplain management. This program established flood maps and building codes to prevent flood loss. Some high flood risk properties were granted subsidies because they were built prior to 1974 or prior to when the community joined the program. Properties built after then were grandfathered in because they were built to flood codes adopted by the community and low to moderate risk properties were given preferred risk rates.

Today, the flood insurance program does not collect enough premiums to cover claims. Sandy/Katrina alone, created $20 billion in debt for the program. In July of 2012, Congress passed the Biggert-Waters Flood Insurance Act which reauthorized the National Flood Insurance Program for five years and also discontinued certain premium subsidies and mandated that policies were written based on risk.

In Gulfport, there are a total of 4,096 parcels in the tax district (that are not businesses or condos). Of those, 653 are Pre-FIRM subsidized properties that are also in high risk flood zones (Zone A & VE -- see: http://www.fema.gov/floodplain-management/flood-zones). Non-primary residences or severe repetitive loss properties will see 25% increases annually in premiums until a true risk based premium is reached. Pre-FIRM primary residences will retain their subsidizes until sold to a new owner or their policy lapses. As for the non Pre-FIRM subsidized homes, they are not effected but may see annual rate increases.  Non-primary homes rated in B, C, or X zone are not subject to the annual increase because they are already risk-based. In all cases, please consult with your insurance agent regarding your particulars.

Another question we have been asked is about the "new flood maps" and how will that affect me. For Pinellas County, there is no "new flood map". The current flood map is the August 2009, flood map (which you can find here: https://msc.fema.gov). Pinellas County is schedule to get a new preliminary flood map in 2015 (http://tinyurl.com/lnypmm6). We believe the confusion has come from the maps that have been shown that display what areas are effected by Biggert-Waters.

So how will all this affect the real estate market? For non flood zone homes, it should have little or no effect though you'll probably see lenders requiring a survey just to proof what flood zone it's in. For homes that are in a Special Flood Hazard Areas, a new owner will be faced with premiums that are risk based and not subsidized (the actual amount being determined by how far above or below the Base Flood Elevation the structure was). Financing may be even more difficult and cash buyers might decide to forgo flood insurance. On the flip side we may see more demand and higher prices for homes that are in non food zones.
Unfortunately being close to the water is the very thing that has helped our area recover may end up hurting us all.

(fine print: please consult your insurance agent for particulars on your property)

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