Coastal living provides great views and a relaxing outdoor lifestyle. But as anyone with coastal property knows, it’s a lifestyle that’s also full of serious risks and potentially costly insurance considerations.
Whether it’s your primary home, secondary home, vacation getaway, or investment property, your coastal property faces multiple hazards from Mother Nature, not the least of which is flooding. As if that’s not serious enough, coastal property owners are also now facing skyrocketing flood insurance rates and stricter standards for rebuilding due to evolving federal guidelines.
Why the increase in premiums?
With the massive losses from storms such as Hurricane Katrina in 2005 and Hurricane Sandy in 2012, the National Flood Insurance Program (NFIP) was left decimated and millions in debt. So in 2012, Congress enacted the Biggert-Waters Flood Insurance Reform Act of 2012 in an attempt to shore up the program’s financial footing, phase out flood insurance subsidies, and discourage reckless coastal development by letting property owners buy subsidized flood insurance.
The losses from these storms in recent years have also prompted FEMA to revise their flood maps. That’s led to many homeowners suddenly finding their property included in a high-risk flood area. For homeowners in the worst-hit coastal areas, these changes have led to dramatic increases in their flood insurance premiums since 2013.
Congress crafts a compromise
There is some good news for coastal homeowners. In March of this year, President Obama signed into law the Homeowner Flood Insurance Affordability Act of 2014, which repeals and modifies certain parts of the Biggert-Waters legislation of 2012. For property owners who have been enjoying artificially low or subsidized flood insurance rates, the 2014 law requires gradual rate increases instead of an immediate hike to full-risk rates. Those subsidies will be phased out over several years, and premiums for most subsidized properties are required to be increased by at least 5 to 15 percent and no more than 18 percent annually until they reach the full-risk rate.
How will the new laws affect you?
That depends. You’ll need to stay up to date on FEMA’s changes to flood maps. If you’re lucky enough to be excluded from a high-risk area, your premiums will probably decrease. But if you’ve suddenly been mapped into a high-risk area, you’ll be required to buy flood insurance if your mortgage is through a federally regulated or insured lender. The ultimate goal of the legislative changes to the NFIP is for flood insurance rates to eventually reflect the true risk of living along the coast. Those whose coastal properties are second or vacation homes will feel the biggest impact, but the new laws will eventually affect rates for all coastal property owners.
The right insurance is crucial
For more information about the new flood insurance legislation, visit FEMA’s flood insurance laws and regulations page. For updates as they become available, visit FEMA's resources for Flood Insurance and Flood Maps for Homeowners.
With the unique flood risks you face with your coastal property, you need the right insurance coverage. Heffernan’s Private Client Group can help you navigate the complexities of the National Flood Insurance Program and provide a personal risk management solution custom-tailored to your needs.
We can also help protect your watercraft, private collections, aviation risks, and more. Contact us today.