snip - Only 18 percent of Americans have any kind of flood insurance coverage. For those who might want it, the price is about to go up. That's because subsidies to policyholders for the federal government's flood insurance program - the National Flood Insurance Program, which is nearly the sole provider of flood insurance - are to phase out starting Oct. 1.
The program is hurting for cash after claim payouts from storms like Irene and Katrina. Its reported deficit is $28 billion. Last year's Hurricane Sandy alone cost the government more than $7 billion in paid losses.
As a result, Congress passed the Biggert-Waters Flood Insurance Reform Act in 2012. That act eliminates government subsides to some 20 percent of policyholders. In some cases, premiums could go as high as $20,000 a year.
"We need these reforms to move premiums to more economic soundness," said Robert Detlefsen, vice president of public policy for the National Association of Mutual Insurance Companies, a trade group for the industry.
"Historically, prices for premiums have been too low, especially in high flood areas where they don't reflect the risk of flooding," he said.
Some flood insurance policyholders are already subject to higher premiums. As part of Biggert-Waters, secondary homes - homes that are not a primary residence - started seeing 25 percent increases from Jan. 1, when policies were renewed. The 25 percent will be added each year until the premiums reach a designated premium level.
According to FEMA, starting on Oct. 1, people in homes with policy lapses or that have been sold and are 4 feet below the agency's base-flood elevation, could have premiums of $9,500 a year.
For individuals with homes at FEMA's base-elevation levels, the rates could be $1,410 a year. Those with homes 3 feet above base-flood elevation could pay only $427 a year.
But in high-risk areas, FEMA says on its website, premiums could reach in "excess of $20,000 a year" in some cases.
As it stands now, higher rates will go into effect over a five-year period starting in late 2014 for flood insurance policyholders who had so-called "grandfather" coverage. They avoided higher rates - as long as they kept up their premiums - in flood-designated areas even when redrawn flood maps showed higher risk. But if those maps are revised now to show greater hazards, the premiums will rise.
Ought to put a stop to building new vacation homes along hurricane-prone beaches, huh.
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