Pursuant to a new Federal law, premiums for residential flood insurance in Florida may soon be as high as $24,000 a year. A new law, the Biggert-Waters Flood Insurance Reform Act, was enacted by Congress in 2012 as a knee jerk reaction to the recent large scale disasters such as hurricanes Katrina and Sandy. Proponents of the new law stated that the passage of this law was necessary in order to make the federal flood insurance “fiscally sound”.
People who bought homes in high-risk areas after the law was passed in July 2012 may have received the same flood insurance rates as the previous owners. When these new owners renew their flood insurance policies, they will be required to get an elevation certificate – which will most likely cause the amount they pay for flood insurance to explode. Much of the potential rate increase will be tied to the height of the home’s foundation as opposed to the base flood level. It is speculated that a home at 3 feet below the base flood elevation may see rates increase to approximately $6,500 per year, and a home at 6 feet below the base flood elevation level may see a rate of $15,000 per year. Oh – and remember that coverage limits for federal flood insurance is capped at $250,000 – regardless of the value of your home.
An article in the St. Pete Times today pointed out two specific examples of how this new law will affect Pinellas County residents. In one example, a home was built in 1960 and was purchased in March of this year for $148,000. Since this home is 7 feet below the base elevation, its annual flood insurance premium will soon be $22,400. Another example was a 1956 home which is 8 feet below the base flood level. This homeowner now pays $1,960 for his flood insurance, but next year his premium will be $29,100. As a general rule, current property owners in the “A” flood zone who are now paying approximately $2,000 a year for flood insurance will see their premiums jump 25% in October of this year, and these premiums will continue to rise over the next eight years to approximately $11,000 per year.
Clearly, the Biggert-Waters Flood Insurance Reform Act will be catestrophic to the real estate market in Florida and beyond. As for prospective purchasers of waterfront property in Florida, make sure you know what you are getting into as it appears that the days of affordable flood insurance are in the rear view mirror.
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