A tide of flood insurance rate increases is rolling in, despite the efforts of state and federal legislators to stem it in waterlogged areas, with 25 percent hikes in the offing beginning Oct. 1, 2013. The nonprofit consumer group United Policyholders, which provides insurance advice to homeowners and businesses, offers two pieces of advice:
If you have flood insurance, don't let it lapse.
If you need flood insurance, get it now.
Congress passed the Biggert-Waters Flood Insurance Act of 2012 to put the National Flood Insurance Program (NFIP) on sound financial footing. The NFIP is $26 billionin debt from paying off disaster claims such as those for the most expensive hurricane in history, Katrina in 2005. Subsidies for homeowners and businesses are being squeezed out, and premiums up to $31,000 a year loom for those who don't raise their homes on stilts. The act had broad bipartisan support until Superstorm Sandy hit in late 2012. "Its aftermath changed the way some U.S. House and Senate members viewed the new law," says Michael Barry of the Insurance Information Institute. Support for Biggert-Waters is eroding fast as influential East Coast legislators realize just how much coastal residents are going to pay for insurance policies from this federally sponsored program. A New York Times story reported that one retired Queens firefighter who used to pay less than $500 for flood insurance will now pay as much as $15,000 a year. "Coastal residents are justifiably panicking about the economic tsunami that is scheduled to crash down on them when Biggert-Waters fully kicks in," warns Amy Bach, the executive director of United Policyholders. On Sept. 18, 2013, the Committee on Banking, Housing and Urban Affairs Subcommittee on Economic Policy will hold a hearing to assess the act's viability.
No way out
"The bind is impossible," says Bach. "Your mortgage lender makes you buy flood insurance [if you live in a flood zone], but you won't be able to afford it. And you can't sell your home because no buyer wants the yoke of that insurance price tag."