Meridian Star

June 14, 2013

Flood insurance rates to increase

By Terri Ferguson Smith / tsmith@themeridianstar.com
The Meridian Star

MERIDIAN —     Some homeowners will get sticker shock later this summer when they find they will be paying 25 percent more for flood insurance.

    The increase is due to a change in federal law that passed in 2012, the Biggert Waters Flood Insurance Reform Act, which seeks to get insurance rates more in line with the actual full risks, according to FEMA, which oversees the National Flood Insurance Program.

    NFIP provides insurance for properties in flood zones that otherwise would not be covered through homeowner policies.

    Not every property owner has to buy flood insurance, but for those who do, the rate increase will be significant, according to Cathy Lummus, Flood Plain administrator for Lauderdale County.

"Prior to this year, anything built prior to the flood maps being adopted, was grandfathered in," Lummus said.

    Those with property that was grandfathered in were allowed to buy flood insurance at the cheapest rate even if their property was located in a flood zone.

    The grandfathering clause is being phased out. Property that is not a person's primary residence phased out this year, so owners will have to pay for flood insurance strictly based on the base flood elevation level, or BFE.

    The rate increases will take effect as insurance policies come up for renewal and rates will be based on where a structure stands in the BFE.

    Although it is a federal program, local insurance agents sell the insurance policies to property-owners.

    "If you have a mortgage on your property, your mortgage company requires you to have flood insurance," Lummus said. "If your bank is FDIC backed, it's mandatory that anybody who lives in a flood zone have flood insurance."

    Some people who live in areas not designated as a flood zone buy flood insurance anyway.

    "We've had plenty of houses that have flooded that were not in a flood zone," Lummus said.     "Just because you are not in the flood zone does not mean that you will not flood."

    For that reason, some mortgage companies require flood insurance for houses that are not in flood zones. A NFIP statement said people outside of high-risk areas file over 20 percent of NFIP claims and receive one-third of disaster assistance for flooding. When it's available, disaster assistance is typically a loan that must be repaid with interest.

    In a summary of the new law, a NFIP statement said the changes allow rates to increase by 25 percent per year until actuarial rates are achieved for the following types of properties:

    • Any residential property that is not the primary residence of an individual;

    • Any severe repetitive loss property;

    • Any property that has incurred flood related damages that cumulatively exceed the fair market value of the property, and

    • Any business property.

    However, Lummus is working on a project offered by FEMA that could initially save property owners as much as 5 percent on their flood insurance. In discussing the matter with the Lauderdale County Board of Supervisors on Thursday, Lummus said if the county joins FEMA's Community Rating System, it could earn a lower, more favorable rating, which would decrease flood insurance rates. As a county works to comply with the CRS guidelines, it could continue earn lower ratings through a points system.

    Josh Todd, supervisor for District Three, said he was all for it and said he would support efforts to save property owners money. The board is expected to take the first step in joining CRS when it meets on Monday.

    The city of Meridian has participated in CRS for many years and has a CRS rating of eight, which means city residents with flood insurance already get a 10 percent discount, according to Randall Gaither of the city's Planning Department. City residents with flood insurance will also get a rate increase, but some of that will be offset by the 10 percent discount.

    The impending flood insurance rate hike has also caught the attention of U.S. Sen. Thad Cochran (R-Miss.) Cochran announced last week that he has joined Sen. David Vitter (R-La.) to introduce legislation to avoid what they called potentially drastic flood insurance rate increases.