We of course talk a lot about personal finances here on our website. Since your home, and its related expenses, are certainly a very big part of your personal finance picture, today’s blog definitely falls under the category of “important to know”.
It’s about flood insurance and, more specifically, the dramatic increase in flood insurance premiums that is affecting millions of American homeowners nationwide. In Washington the House recently, and overwhelmingly, passed a new bill, the Homeowners Flood Insurance Affordability Act of 2014, in a rare act of bipartisanship. (The vote passed 306 to 91.)
This is incredibly important to many Americans because of the premium rate hikes, in some cases up to 10 fold, that many are facing. The new bill would, under the National Flood Insurance Program, limit the annual increase of any individual policy to no more than 18% per year. This new legislation also has provisions to instruct the Federal Emergency Management Agency to create an “affordability target” limiting the flood insurance policy cost to 1% of the total coverage amount for any single home.
The bill was initially approved by the Senate earlier in the year but Democrats and Republicans came together to revamp it, so that it would include the new wording for the “affordability target” and 18% cap. One of the main reasons that the new legislation was drafted was due to the Biggert-Waters Flood Insurance Reform Act of 2012, a law that was designed to reflect the high risk of having a home in an area that was considered to be located in a “high flood” area. It affected approximately 5 million people, most of whom were negatively affected by Hurricane Katrina in 2005. Unfortunately, shortly after the law was enacted in 2012, the Northeast was hammered by Super Storm Sandy.
The new bill was applauded nationwide by many banks, real estate brokers and homebuilders as well as individual homeowners. Because it continues to subsidize insurance rates however, quite a large number of conservative groups had actually opposed the bill, a point that is now moot.
The Congressional Budget Office, nonpartisan government entity, said that the newly passed House bill would have almost zero impact on the financial standing of the National Flood Insurance Program over the next 10 years, as well as saying that the bill would pay for itself with annual annual assessments to the program’s reserve funds. That includes $25 a year for primary homeowners and, for businesses and vacation homeowners, $250 a year.