flooded houses

The National Flood Insurance Program (NFIP) flood insurance rates and other charges will be revised for new or existing policies beginning April 1, 2015, as a result of recent flood insurance legislation known as the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA).

Some of the changes taking place in April include a new rating option for properties newly mapped into a high-risk area (Special Flood Hazard Area, or SFHA).

New Flood Insurance Rate Maps (FIRMs) can show that the risk of flooding has changed. And for some property owners, a change in risk means new flood insurance requirements. In recent years, the Federal Emergency Management Agency (FEMA) has sought to ease the financial impact of a map change by extending eligibility for a lower-cost Preferred Risk Policy (PRP) if a building outside of the SFHA is newly mapped into the SFHA.

Until now, the PRP Eligibility Extension has applied to any building newly mapped into an SFHA since October 1, 2008; although as of October 1, 2013, PRP Eligibility Extension premiums began increasing at a higher rate on renewal. Beginning on April 1, 2015, FEMA is implementing a new procedure to meet the requirements of HFIAA.

Following a map revision, the owner of a building newly mapped into an SFHA will be rated according to a new procedure for newly mapped properties. This rate will be equal to the PRP rate but with a higher Reserve Fund Assessment and Federal Policy Fee for the first 12 months following the map revision.

After the introductory year, the rate will begin its transition to a full-risk rate with annual rate increases of no more than 18 percent each year. Please find additional details in the Newly Mapped Procedure table below.

ScenerioAction To Take
Property newly mapped into an SFHA on or after April 1, 2015Eligible for the Newly Mapped procedure if the policy becomes effective within 12 months of the map revision date
Property newly mapped into an SFHA on or after April 1, 2015, but not covered within 12 months of the map revision dateProperty no longer eligible for Newly Mapped procedure. Post-FIRM buildings are eligible for grandfather rating. Pre-FIRM buildings must be rated using the new maps and may be eligible for pre-FIRM subsidized rates
Property newly mapped into an SFHA between October 1, 2008, and March 31, 2015, but not currently covered Eligible for the Newly Mapped procedure if covered before April 1, 2018
Property with policy validly issued under the PRP Eligibility Extension prior to April 1, 2105Renewed using the Newly Mapped procedure on the first effective date on or after April 1, 2015, policies for these buildings will receive the same premium as those newly issued using theNewly Mapped procedure

Grandfathering remains a cost-saving option for policyholders when new maps show their high-risk buildings having even a higher risk (e.g., Zone A to Zone V, increase in Base Flood Elevation) or if the property does not qualify for a PRP.

To talk with one of our flood insurance experts to see how you may be affected, contact us here.

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