Flood insurance policy holders would do well to flood their savings accounts with extra dollars in the months ahead.
Significant premium increases will take effect this October as part of changes to the National Flood Insurance Program. The NFIP is a federal initiative that insures property located in low-lying areas against floods, which are not covered under homeowner’s insurance policies.
Premiums will increase by an average of 10 percent annually for the next five years as the Federal Emergency Management Agency builds up a reserve fund for the NFIP. Coastal hurricanes such as Sandy and Katrina and the floods that have plagued areas along the Mississippi and other rivers in recent years have left the NFIP $24 billion in debt.
“For decades the program has made flood insurance available at subsidized rates that did not reflect the true risk of flooding. Artificially low rates and discounts are no longer sustainable,” said Kristin Robinson, a senior advisor to the National Association of Realtors.
The premium increases and other NFIP changes will be discussed today as part of the annual Hurricane Preparedness Expo. The event, put on by the Governor’s Office of Insurance, runs from 9 a.m. to 1 p.m. at the Victory Drive Home Depot, located just west of the Victory Drive-Skidaway Road intersection.
The state insurance commissioner, Ralph Hudgens, as well as FEMA representatives and city and county flood plain management staff, will be among those on hand to answer questions and review flood maps with property owners.
Many Savannah-area flood policy holders will see premiums increase well beyond the 10 percent average.
Business properties, vacation homes and other non-principal residences built prior to when the first Flood Insurance Rate Map was drawn up for Chatham County, will see a 25 percent increase annually.
Payments on primary residential property in V zones — most of Tybee Island, for example — will jump from between 11 percent and 17 percent. Those in A zones, which includes thousands of properties across Chatham County, face 6 percent to 16 percent increases.
Even those in X zones, determined to be outside the 100-year flood plain, may see premiums increase by as much as 8 percent.
“Most of us who buy property in coastal areas understand you pay to play, but nobody knew we would end up paying that much,” said Marsheila Rhodes, an insurance agent with local firm Bush Insurance & Financial Agency. “It’s getting more and more expensive to live in Coastal Georgia.”
The NFIP changes will also require more diligence on the part of policy holders.
For those in pre-FIRM properties, or the properties built prior to the creation of the first Flood Insurance Rate Map, any lapse in policy will result in their properties being subject to the full risk rating and a substantial premium increase.
Those property owners will also be required to secure an elevation certificate from the county, which involves getting a costly property elevation survey.
For those policy holders with grandfathered rates on their flood insurance premiums, those rates will be phased out starting late next year with the schedule update of the local Flood Insurance Rate Map.
The NFIP changes will have an impact on the real estate market, although to what extent is uncertain, said the president of the Savannah Area Board of Realtors, Donna Davis.
New policies written after Oct. 1 will be subject to the full risk rating premiums. And higher premiums will drive up the monthly cost of owning a home in a flood zone, a consideration for many buyers.
Whether higher premiums reduce demand enough to harm values is unknown.
“We don’t know enough about it yet to know the true impact,” Davis said. “But it is one more thing to be factored in by the buyer.”
HURRICANE PREPAREDNESS EXPO
When: 9 a.m. to 1 p.m., Saturday
Where: Home Depot on Victory Drive
Info: Go to http://www.oci.ga.gov/FireMarshal/HurricaneExpo.aspx for more information.
CHATHAM COUNTY FLOOD ZONE MAP
The government website has information on flood zones, including a map and an explainer. Go to engineering.chathamcounty.org and click on the “Flood Zones” tab across the top of the home page to access the information.
FACTS ABOUT THE NFIP CHANGES
The Biggert Waters Flood Insurance Reform Act passed last July and requires FEMA to make changes to the National Flood Insurance Program (NFIP), which is $24 billion in debt. FEMA has created a reserve for the NFIP and will raise premiums and phase out grandfathered rates to fund the reserve.
Go to www.fema.gov and type “Flood Insurance Reform Act” into the search box on the top right-hand corner of the home page. Premium increases will take effect this October as part of the changes to the National Flood Insurance Program.