Flood insurance subsidies phasing out
Residents of pre-flood insurance rate map (pre-FIRM) properties will see flood insurance subsidies phase out under a long term reauthorization enacted by Congress last year. The change will affect only a small subset of property owners, but result in higher insurance costs for those who benefited from the lower rates. The decision to phase out the subsidies comes after years of on-again-off-again switches by the government when flood insurance programs were only renewed for short periods of time.
Government officials say getting rid of the subsidies will decrease the uncertainty that was pervasive in the marketplace. Since 2005, there have been more than 17 flood insurance stoppages and last minute program reauthorizations, causing a huge hassle for property owners seeking coverage to meet mortgage and other financial lending requirements.
Old plan vs. new plan
Some of the subsidies were created in order to benefit property owners of sites with outdated flood maps – instead of going through the process of updating all of the maps, some areas were just grandfathered in. Under the new plan, officials will work to improve the accuracy of floodplain maps for these older properties, and standardize the data across properties in these areas.
Various groups of pre-FIRM property owners will be affected by the phase outs, including owners of business properties, non-primary residences and owners of sites that have experienced repetitive loss. Owners of pre-firm primary residences will keep their subsidies unless the property experiences repetitive loss, is sold to a new owner or its policy expires.
The subsidy phase outs will directly affect business owner’s bottom lines as their actuarial insurance costs increase. Owners who are affected by the switch are encouraged to obtain an elevation certificate in order to confirm or negate the need for flood insurance. If it is determined that flood insurance is needed, prices increase.