Millions going to suffer from steep hikes in federal flood insurance premiums

Millions of homeowners, who are already struggling to recover from Hurricane Sandy, are going to face steep increases in their flood insurance premiums. Homeowners having federal flood insurance policy will come across some unwanted news when they go to renew their policy the next time. A new legislation that went into effect on 1st of April, in an attempt to revive the vexed National Flood Insurance Program, allows rate increases by up to 18% and individual policy premiums for homeowners in high-risk areas by 25%. Apart from this, policyholders will also be liable for new surcharges - $25 for owner-occupied primary homes and $250 for second homes. Scott Primiano, an insurance broker based out in New York, and who has been holding many meetings for his clients’ awareness since the inception of the new legislation, said “This appears to be death by a thousand cuts.” "The concept sounds good, but no one can say what the full risk is. ... They are going to take it in bits and pieces every year and it keeps going until Congress determines we've had enough," he added. Standard home insurance policies do not cover for damages from flood. Hence, homeowners must buy additional protection for that. According to the Federal Flood Insurance Program, the premium that an average homeowner spends a year for flood insurance is $650. However, premiums are much higher for properties located in high risk areas. According to a spokesperson of the Federal Emergency Management Agency, about 5.2 million people are currently having flood insurance policy, and the price hike is going to affect about one million of them. This rate increase is just because to put the Federal Flood Insurance Program on better financial footing. Nearly 50 years ago Congress created to program to offer protection to homes from floods in coastal and inland areas. Though flood insurance isn’t compulsory, properties in flood prone areas must carry flood insurance in order to qualify for federally backed mortgages. This signifies that flood insurance is basically a necessity for many homeowners out there. According to Rafael Lemaitre, an official for Federal Emergency Management Agency, the Federal Flood Insurance Program has been paying out for decades much more than what it drawn. As per data, during the years 1980 - 2013, what United States paid for flood related damages is more than $260 billion. “The new legislation is intended to improve the long-term sustainability of the program while being sensitive to needs of policyholders.” During the last decade, due to catastrophic hurricanes like Sandy and Katarina, the program has indebted billions in dollars. In 2012, Congress phased out federal discounts for policies in high-risk areas via introducing the Biggert-Waters Flood Insurance Reform Act. However, last year, it again passed the Owner Flood Insurance Affordability Act, that showed down the impact of rates increases for many policies. In spite of the Owner Flood Insurance Affordability Act, the increases remained significant and are supposed to burden many lower and moderate income homeowner. Homes that were seriously damaged during Sandy or Irene, could see steep premium increases by up to 25% as the owner have already filed claims. Tom Daniels, a retiree from Lindenhurst, New York, said his home was under 3½ feet of water after Sandy had struck, and he received $97,000 in insurance for the damages. He said his flood insurance rates have risen to $2,800 annually from $600 a year.