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Flood Insurance Legislation on the Outer Banks

Flood Insurance Legislation

Vacation and second homes on the Outer Banks may see higher flood insurance premiums if the subsidies provided by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) are discontinued. The new rates will reflect the full flood risk of an insured building, and some insurance subsidies and discounts will be phased out and eventually eliminated. Rates on almost all buildings that are, or will be, in Special Flood Hazard Areas (SFHAs) will be revised over time to reflect full flood risks. Based on various conditions set forth in the law, subsidies and grandfathered rates will be eliminated for most properties in the future.

Subsidized Rates for Pre-FIRM Buildings Begin Phase-Out

The Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12), which was signed into law on July 6, 2012, requires FEMA to take immediate steps to eliminate a variety of existing flood insurance subsidies and calls for a number of changes in how the program operates.

Immediate Changes—Starting January 1, 2013

  • Subsidized premium rates for some “pre-Flood Insurance Rate Map” (pre-FIRM) non-primary residences in Special Flood Hazard Areas (SFHAs) will begin to increase by 25 percent a year until they reflect full-risk rates.
    • The new rate table includes a  25 percent rate increase for non-primary/non-principal residences. Policies falling under this new requirement will be identified through the Transaction Record Reporting Process (TRRP) Plan as all Single-Family occupancies and 2-4 Family and Other-Residential occupancies insured as unit owner policies in the condominium form of ownership.

Read the WYO Bulletin NFIP Service Bulletin W-12043

Future Changes—Starting August 1, 2013

  • Subsidies will be phased out for severe repetitive loss properties consisting of 1-4 residences, business properties, and properties that have incurred flood-related damages where claims payments exceed the fair market value.
  • Properties with subsidized rates will move directly to full-risk rates after a sale of the property or after the owner has allowed the policy to lapse.
  • New policies effective as of July 6, 2012, the date BW-12 was signed into law, will be issued at full-risk rates.

Read the WYO Bulletin NFIP Service Bulletin W-12109

Biggert-Waters Flood Insurance Reform Act of 2012 (BW12) TimelineCreated December 12, 2012

 Date of Implementation

Who Is Affected

What Will Happen

Why Is It Changing

July 10, 2012 Owners of property: • that is affected by flooding on Federal land caused, or exacerbated by, post-wildfire conditions on Federal land, and

• who purchased flood insurance fewer than 30 days before the flood loss and within 60 days of the fire containment date.

 

• If a flood occurs under certain conditions, an exception to the 30-day waiting period is implemented for a policy purchased not later than 60 days after the fire containment date.

 

• BW 12 Section 100241 created a third exception to the 30-day waiting period for insurance coverage for private properties affected by flooding from Federal lands as a result of post-wildfire conditions.

 

January 1, 2013 Homeowners with subsidized insurance rates on non-primary residences

• Properties receiving subsidized insurance rates are those structures built prior to the first Flood Insurance Rate Map (pre-FIRM properties) that have not been substantially damaged or improved.

 

25 percent increase in premium rates each year until premiums reflect full risk rates

 

• BW 12 calls for the phase-out of subsidies and discounts on flood insurance premiums.

• This premium increase is outlined in Section 100205.

• The phase out of subsidies affecting non-primary residences was also mandated by earlier 2012 legislation, HR 5740.

 

August 1, 2013 Owners of business properties with subsidized premiums

• Owners of severe repetitive loss properties consisting of 1-4 residences with subsidized premiums.

• Owners of any property that has incurred flood-related damage in which the cumulative amounts of claims payments exceeded the fair market value of such property.

 

25 percent increase in premium rates each year until premiums reflect full risk rates

 

• BW 12 calls for the phase-out of subsidies and discounts on flood insurance premiums.

• These premium increases are outlined in Section 100205.

 

If you are wondering how this affects your home, whether you’re buying or selling, contact me today.