President Obama Signs Flood Insurance Relief Bill Into LawLegal Compliance Resource
April 16, 2014 — 974 views
Last Friday, President Obama signed the flood insurance relief bill into law. The law protects homes built in flood prone areas from sudden spikes in flood insurance rates. According to the new law, the premiums on flood insurance will be capped. People who are buying homes in flood prone areas will be given access to below market premium rates through policies subsidized by tax payers.
Two years ago, the government had overhauled the nation's flood insurance program. The idea was to lower homeowners' dependence (those who live in flood prone areas) on subsidized insurance premiums. Towards this, the government undertook a massive program to update the flood maps which were being used to set premiums.
What happened after the 2012 law was implemented?
After the implementation of the new rules, many homeowners living along the Gulf and Atlantic coast and those living on flood plains suddenly faced unaffordable increases in flood insurance rates. There were loud protests and the government was forced to go on the back foot.
Sen. Robert Menendez from New Jersey says how many people had approached him with tears in their eyes and horror stories of how insurance premiums had skyrocketed and were threatening to cause them to leave their homes.
Many people have blamed the Federal Emergency Management Agency for a faulty implementation of the 2012 law. For example, some areas had never been flooded but the homeowners there were still warned that they would have to pay higher, unaffordable premiums. It was one of the reasons for the protests.
Sen. Mary Landrieu, (Democrat) from Louisiana said that new law had stymied draconian increases in flood insurance rates and the National Flood Insurance Program had again become affordable.
Tax payer backed premiums on older houses, to stay
The high insurance premiums also affected the sale of homes in the flood prone areas. That problem has been addressed by the new law to some extent and it has brought relief to the real estate industry. One of the provisions in the new law allows people selling homes that were built before the older flood insurance maps were drawn to pass on the subsidized policies to the new homeowner, instead of the rates determined by the 2012 law.
Not everyone is happy with the new law though. Critics of the new law are saying that homeowners in flood prone areas knew that the areas were prone to flooding yet they were still living there. So asking tax payers to foot the bill for damages from floods in such cases is not a fair deal.
Moreover, if you own a second home in a flood prone area and the home has been repeatedly flooded, you may see your flood insurance premium rates rise by up to 25 percent each year until it reaches a level that reflects the damages you might incur from flooding.