Major Changes Take Effect on NJ Flood Insurance

While the country is embroiled with a government shut-down and the implementation of the Affordable Health Care Act, not much press has been given to the latest flood changes. 

I thought it necessary to discuss some of the most important revisions that went into effect on October 1.

Premium Increase

As many of you know, Congress passed the Biggert-Waters Flood Insurance Reform Act last year and the President signed it into law in July of 2012.

Many of the provisions did not come to public attention until January of this year, roughly two months after Hurricane Sandy. By then, the folks who incurred damage also learned of the potential increased premiums associated with the new law.

It’s no secret that the National Flood Insurance Program is running a $20 billion deficit and that Congress and the President have been wrestling with ways to reduce that debt and make the program more viable. 

Some older homes that are in special flood hazard areas and are non-primary residences saw their rates increase earlier this year. That will continue until the rates are on-par with the true cost of the coverage.

However, as of October 1, business properties, homes with repetitive losses, and properties with claim payments in excess of the fair market value of the property will also see a 25% annual increase in flood insurance.

Again, it is the aim to eliminate the subsidies that have existed in the flood program for years.

New Fee

A new fee will also be added to the program effective 10/01/13. It will be a Reserve Fund of 5% of the annual premium. This will serve to help offset the cost of future claims and will only be charged on properties in special flood hazard areas.

Elevation Certificate Required on New Home Purchases

The most important change starting on October 1 will be the requirement for an Elevation Certification on all new home purchases (except preferred policies on homes not located in a special flood hazard area).

While the premiums will continue to rise, rest assured flood coverage is readily available to homeowners all around the country (even with the government shut-down).

Homeowners Insurance markets are also still available for folks who wish to buy their dream home on the water.

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