Charleston Real Estate

Worried about Flood Insurance?
February 22nd, 2014 9:07 AM

So, already I've broken my New Year's resolution of blogging frequently! I promised I would try to blog at least once a week and here I've missed two weeks in a row. Not to make excuses, but was busy the first week and took a vacation to Florida the second week. Am I the only one to break their resolutions?

The hot button topic, at least in our market, seems to be the spike in flood insurance premiums. Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012 in an effort to pay down the National Flood Insurance Program's roughly $24 billion debt. Catastrophic events such as Katrina and Sandy have devastated these funds and they are now operating heavily into the red (what else is new with our government?). Anyway, some homeowners could see their annual rates spike from a few hundred dollars to tens of thousands of dollars in 1 year! Obviously, this will make some properties un-marketable as buyers don't want to purchase a home with an annual flood insurance premium of $10,000-$20,000, or more. Yes, many will have premiums in this range.

Lobbyists for the SC Association of Realtors and our local Charleston Trident Association of Realtors have been advocating for Congress to delay full implementation of the flood insurance changes for four years. This would allow FEMA to complete an affordability study that was mandated within this bill, as well as give Congress adequate time to review those regulations. Both the House and Obama Administration have indicated they will not support delay of full implementation. This law will remove subsidies that kept flood insurance premiums artificially low for policyholders who own homes that were built before the federal program went into effect in certain communities.

In Charleston County, homes built prior to 1971 received subsidies. In Berkeley County, it is homes built before 1983 and in Dorchester County, it is homes built before 1982. Under the new law, those subsidies will go away and premiums will increase significantly. Those that have a flood policy in effect prior to July 6, 2012 will see their rates increase by an average of 10% annually, starting at their renewal date.

Incremental increases will continue until rates reach levels that would reflect the actual risk from flooding. Rates are determined by the home's elevation in relation to the base flood elevation level for that property. To determine rates, homeowners will need an elevation certificate completed. But, the biggest problem is the new rates will be instituted immediately and in full if coverage lapses, the property is sold, substantially damaged, or improvements occur, or if a property was uninsured when the new law was enacted, according to FEMA.

So what should a homeowner do? First, look at your current flood maps. Then obtain an elevation certificate, if you think you're impacted. Or better yet, call your insurance agent for details on your policy.

Visit my website as well to find out more, and feel free to contact me anytime to discuss real estate matters that are on your mind.

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Posted by Joe Kavanagh on February 22nd, 2014 9:07 AMPost a Comment

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