Since the beginning of the National Flood Insurance Program
owners of buildings that found themselves too low
in the flood zone
through no fault
of their own have been given a break on their flood insurance premiums.
These properties have been insured by the NFIP, at rates that do not
reflect the true risk of flood damage. The policies are
by the NFIP.
The NFIP can borrow from the U.S. Treasury when premium collections are not
sufficient to pay claims, but that loan must be repaid.
no fault part of this condition means one of two things:
- The building was built before 1975
or before the community (governing jurisdiction) received its first Flood
Insurance Rate Map (FIRM). These properties are insured
at Pre-FIRM rates,
unless the owner shows by an official elevation survey that
the building is NOT too low and elects to be
rated based on elevation.
- The building was built Post-FIRM, in
compliance with a FIRM, with a permit from the community, but a more
recent FIRM shows the building to be at greater risk of flooding. These
buildings have been grandfathered
administratively, and allowed to keep the rate-class (flood zone
and building elevation relative to
BFE) that applied at the time of
Discounted insurance rates are being discontinued
for all properties except Pre-FIRM primary residences that have not
lost their qualification for the rate. (See How Residential Property
Loses its Pre-FIRM Rating, below.)
- Pre-FIRM rates are being
discontinued for all business properties and other buildings that are not
someone's primary residence. Pre-FIRM rates for currently insured
properties expire with termination of an existing policy and are not
available for a new policy on the property. Currently insured properties
that no longer qualify for Pre-FIRM rates will see their premiums increase
25% per year until
actuarial rates are achieved.
- Grandfathered rates are
being discontinued, with premium increases toward actuarial
rates being phased in over a 5-year period, 20% of the
increase being added each year. The five-year period begins on the
Effective Date of the FIRM that identifies the increased risk. For
example, if the actuarial rate is $1000 per year
more than the subsidized rate, the premium would increase $200 per year
for five years.