Over the past 12 months, floods in different parts of the country have been in the news. Many people don’t realize that foods are actually the most common natural disaster in the United States.
In a coastal region such as ours, it is especially important for all property owners— business and residential–to know their risk of flooding. From 2003 to 2012, total flood insurance claims averaged nearly four billion dollars per year. In high-risk areas, there is at least a one in four chance of flooding during a 30-year mortgage. However, losses due to flooding are not covered under typical business and homeowners’ insurance policies. Floods can result from hurricanes, tropical storms, heavy rains, or simply a clogged storm drain.
Over the past few years, there have been numerous changes in the flood program. In 2014, the Homeowner Flood Insurance Affordability Act (HFIAA) of 2014 became law. HFIAA resulted in modifying and repealing certain provisions of the 2012 Biggert-Waters Flood Insurance Reform Act (BW-12). What does this mean to you as a policyholder? Changes resulting from HFIAA include a new surcharge that is added to all flood insurance policies. This surcharge is to offset the subsidized Policies in order to achieve BW-12’s financial sustainability goals.
Since HFIAA, we have seen increased premiums, higher policy fees and added surcharges. Most of these fees are based on the occupancy of the property. A dwelling that is an insured’s primary residence will see a $50 fee, whereas secondary residences, rental and commercial properties are seeing a $250 fee. In addition to this HFIAA surcharge fee, you are also seeing a Reserve Fund Assessment fee, which is based on 15% of the annual premium along with the overall rate increase of eight to 25%.
If you have commercial property, be sure to know your occupancy type. HFIAA has established the surcharge as a flat fee based on an insured property’s occupancy type. Rate increases are lower on “Other Non-Residential,” which, for example, includes schools and non-profit organizations, while “Non-Residential” applies to small businesses and other uses.
It is good to know that there is a bright side to HFIAA. Although the HFIAA and BW-12 reforms brought about increases, the reform also requires new flood maps.
New flood maps should be out in the first quarter of 2017. From the preliminary drawings, it appears that Moderate Wave Action is being taken into account. Because Georgia’s coast sits farther back than other states, we have less wave action. This may not be ideal for surfing, but it works great with these new flood maps. From meetings with the Floodplain Management Department, we are seeing a lot of V zones being moved to AE zones. This is a positive move because V zone is higher risk, has no base flood elevation (BSE) and can be a velocity hazard (“wave action”), while the AE zone is 2 an area inundated by 100 year flooding (a one percent annual chance flooding) which has an established BSE.
We are also seeing some of the AE zones being moved to the X zone. Again, this is positive because the X zone includes areas determined to be outside the 500-year floodplain. In addition to these possible flood zone changes, the base flood in some areas is also being lowered.
For property owners, this is good news. If your property moves to a better flood zone, or if the based flood is lowered in your area, you could see a significant reduction in your flood premium. If you get an opportunity to see the preliminary flood maps for your area, you should do so and see how it will affect your flood rates.
Chris Butler is with Bernard Williams & Company, which was established in 1934 in Savannah. Bernard Williams & Company is independently owned and offers clients a winning combination of quality, service and value from a carefully selected group of financially sound, reputable insurance companies. Contact Chris at (912) 234-4476 or firstname.lastname@example.org.