Flood insurance premiums may rise in U.S.

By Ashley A. Smith

An extension to the National Flood Insurance Program could mean stability to home buyers, but brings with it the possibility of much higher premiums.

“The first thing it does, and this is very important, is it brings stability to local real estate sales,” said Joan LaGuardia, spokeswoman for the Lee County Department of Community Development.

For years the flood program has gone through periods of being on the brink of expiring, before Congress renews the program for a few months — only for the deadline of expiration to return again. President Barack Obama signed a bill Friday that included a five-year extension to the flood program.

 

But under the new law, premiums could increase up to 20 percent a year instead of the previous limit of 10 percent. Also some homes with a history of flood risk and vacation homes could see premiums go up by as much as 25 percent in one year.

Florida has the most flood insurance policies in the country — just over 2 million. Locally, unincorporated Lee County has nearly 88,000 policies, followed by unincorporated Collier County at nearly 58,000 policies and the City of Cape Coral with about 34,000 policies.

Flood insurance — through the National Flood Insurance Program — is mandatory in FEMA flood mapped areas that are considered hazardous or recommended for other potential flood areas that are not considered hazardous. Homeowners who don’t have a mortgage are not required to carry flood insurance.

Stability is important in Southwest Florida, where much of the economy is based on real estate sales.

“There were some periods where people waiting to purchase a home and who needed flood insurance, would find themselves briefly unable to get flood insurance,” said LaGuardia. “Realtors have been following this very closely, and I think all of them will breathe a sigh of relief that long-term stability has come to the program and that’s important for our economy.”

The new law attempts to put the program on better financial footing by giving the government greater flexibility to raise rates. The program was generally self-sustaining until Hurricane Katrina and other hurricanes struck in 2005. The program now owes the Treasury nearly $18 billion dollars.

 

Ken and Diana Marino, Fort Myers residents who live in San Carlos Park, said they currently pay about $250 a year in flood insurance – an expense they can’t afford as retirees on a limited income.

“About $250 is not real expensive,” said Ken Marino. “But we’re retired and living on Social Security and all of a sudden you’re hit with another $250. It figures to about $20 a month, but you pay it all at once and it’s just one more thing we don’t need.”

Marino said he and his wife have lived in their San Carlos Park home for about eight years, but it was about five years ago that they were placed in the “preferred flood zone.”

“We’re closer to (Interstate 75) than we are to (U.S. 41),” said Marino. “And there’s one little creek about a mile from our house and they say because of that creek, probably 10-feet wide at its widest, is why we’re in a flood zone.”

Even after going through Hurricane Charley a few years ago, Marino said his home never flooded, however he doubts he can fight the cost.

“We don’t feel it’s justified,” said Marino. “But fighting the government is like fighting City Hall — there’s nothing you can do except pay for it.”

 

Lewis Knickerbocker, 76, of Fort Myers said he pays about $300 a year in flood insurance for his home. Although his insurance isn’t mandatory, he doesn’t mind the current price or the potential for his premiums to increase.

“It’s for protection,” said Knickerbocker, adding that he’s never had a flooding problem at his home near Pine Lake. “I live near the lake and it’s gotten high in the last 20 or so years, so it’s a protection thing. That’s what you have all insurance for. Everything else goes up, so why shouldn’t it go up.”

Tim Shaw of Fort Myers-based Tim Shaw Insurance Group said flood insurance is highly recommended for this part of Florida, which is subject to high winds and flooding.

“You want to be prudent in the event of that once in a hundred year storm,” said Shaw. “Our job is to advise people to protect their assets, so if you want to protect your assets, you can do that for roughly $400 or $800 a year. It’s highly recommended no matter what zone you’re in here in Florida.”

A $250,000 home with six inches of water could cost homeowners as much as $150,000 in damages without insurance, Shaw said.

Lee County small business owners and homeowners receive about $15 million in discounts every year that stays in the local economy, instead of going off into flood program policy premiums, LaGuardia said, adding that the discounts come from local governments entering into agreements with the national program about how flood plans are managed.

“(The extension) also stabilizes how local government can get discounts for policy holders and these local discounts are important, because for unincorporated Lee County we have about (88,000) policy holders,” said LaGuardia.

 

 

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