By Terri Ferguson Smith / email@example.com
The Meridian Star
Homeowners with property insured in a designated floodplain have been experiencing sticker shock since last October, and while local officials hope to help bring down rising flood insurance rates, some members of Congress are hoping to at least delay rate hikes.
The National Flood Insurance is a federal program that provides flood insurance for property owners throughout the U.S. It is the only means by which property owners can purchase flood insurance, although policies are often sold through local insurance agencies.
In 2012, congress passed legislation to increase rates to shore up the program, which was losing money. The new law required 25 percent annual increases. The U.S. Senate last month passed legislation to slow down the increases. House GOP leaders are said to be putting the final touches on legislation that would significantly weaken the NFIP overhaul. The flood program is presently $24 billion in the red, mostly because of huge losses from Hurricane Katrina and Superstorm Sandy.
Meanwhile, local property owners have already seen a big increase in insurance premiums, according to Cathy Lummus, of the Lauderdale County Permit office. Lummus has been working to get the county in NFIP's Community Rating System, which can help reduce the overall cost of flood insurance for county residents. The city of Meridian already participates in the system.
Lummus said she has talked to people whose flood insurance has increased as much as $1,900 per year. Chris McDonald, an agent with State Farm Insurance, said his clients have reacted to the high rates.
"People are stunned, shocked and wondering what are they going to do," McDonald said. "In a lot of cases, it's become unaffordable, but if you've got a mortgage, it's required. Just because you can't afford it, doesn't mean you can do without it."
Nan Watkins, vice president for mortgage lending, Trustmark Bank, said people with mortgages on property in a floodplain are required to have flood insurance. That includes property that was previously not listed in a flood zone, but is later added.
"Because of the remapping, we have homes that were not in a flood zone previously that are now in a flood zone and now we're having to require them to go get flood insurance. It wasn't when they bought but now it is," Watkins said. "You purchase your home. You go out and select what you know you can afford and then the rules change in the middle of it. Now you've got an extra expense that you've got that you've never planned on. If you have a mortgage, you don't have a choice."
FEMA remaps every 10 years. Sometimes properties are added; sometimes they are taken off the list.
McDonald said the rate increases have had an enormous impact on some homeowners.
"Let's say there's somebody who has had a mortgage for 10 years and they have 20 years left and the flood rules have changed," McDonald said. "Their flood insurance has increased substantially so their house payment has gone up."
Property owners with property not inside the floodplain are not required to have flood insurance, but they may do so if they wish, McDonald said. There is no guarantee that just because a property is not listed in the floodplain, that it will never flood.
Many people assume that their standard homeowners insurance will cover floods, McDonald said.
"No, it does not."
McDonald said people looking to buy a house should ask questions of neighbors. Two questions he suggested:
How high has the water ever risen on the property?
How close to the house has it risen?
What really affects the cost of flood insurance is where a structure sits in relation to the base flood elevation, McDonald said.
"When you are there or higher, it impacts your premium. If you build below the base flood elevation, you're asking for a very, very expensive premium," he said.
When people talk to Lummus about their plans to build, she said she always advises them to build at least two feet above the BFE. It will cost more up front but will save thousands in flood insurance premiums during the life of the mortgage, she said.
Lummus recently received some good news on her office's work to join the Community Rating System. The county has already enough points that it will likely see a rate drop from 10, which is the highest, to a nine by October. The decrease could be more than that within a couple of years, she said. Each drop in rating means a 5 percent discount to property owners in flood zones, she said.
There are 239 flood insurance policies in the county, but that number does not include flood insurance policies inside Meridian, Lummus said.
Randall Gaither is the coordinator of the NFIP Community Rating System program in the city of Meridian, which has a rating of eight. People consult the city's building and permit office when they apply for permits for new construction or renovations and they also make inquiries about a property's status in a flood zone if they are considering buying land in the city.
Gaither said there are typically between 400 and 450 flood insurance policies held by city residents. Those policies represented $60 million worth of property coverage within the city of Meridian, Gaither said. "My goal is to improve our points so that at some point in the future we can get a better rating without spending a lot of time and money to do that," Gaither said.
Gaither said letters are sent each year to property owners who have land in a floodplain.
"Meridian’s floodplain is typically low lying areas near the seven major waterways of the city," the letter states. "Meridian encountered heavy floods in 1951, 1961, 1964, 1972, 1974, 1979, 1990, 1993, and 2003. The flood in 1990 was especially severe and resulted in extensive damage to structures and property near Sowashee Creek."
For information about floodplains in Meridian, call 601-485-1900. In Lauderdale County, outside city limits, call 601-484-3992.
The Associated Press contributed to this report.