Flood Insurance rates rise January 1, 2014 under Federal law

[David Krulac]

The Biggert-Waters Flood Insurance Reform Act of 2012 goes into effect Jan, 2014. The signature Waters of the Act is Congress Person Maxine Water.

The Federal flood insurance program has been operating in the red for many years even before Sandy and Katrina, The premiums are just way to low to cover all the claims being made. the flood program has a $25 billion shortfall that been made up by the taxpayers. This bills raises all rates over a period of years to increase the premiums to cover all the claims.

Some rates have increase ten fold going from $1,000 a year to $10,000 a year and $1,200 a year to $12,000 a year. One such homeowner saw their flood insurance go to $13,000 a year and they could not pay it, so even though their mortgage is current on principle and interest, their Bank started foreclosure action on them for not paying the flood insurance premium, which was beyond their means to pay.

In addition new flood maps are being developed and properties formerly not in the flood are will now be in the flood area and require flood insurance.

Flood insurance is only mandatory if you have a federally related mortgage which is 95% of the mortgages now. If you have no mortgage, you are not required to get flood insurance, but of course you will not be able to make any claims if a flood occurs.

From a real estate investment position, real estate requiring flood insurance just became more costly to own, less desirable and lower valuation due to increased expenses.