Changes to the Recent Flood Insurance Program

Changes coming for National Flood Insurance Program (NFIP) rates

The Biggert-Waters Act of 2012 has changed The National Flood Insurance Program (NFIP) to fill a $20 billion deficit created by large-scale disasters, such as hurricanes Katrina and Sandy, and to ensure that flood insurance rates more accurately reflect the real risk of flooding. The act eliminates premium subsidies. The greatest impact will be felt by older secondary homes in high risk flood areas.

In general, rate changes will have the greatest effect of properties built before 1975, or prior to the initial flood insurance rate map (FIRM) for the community that are in a high risk flood zone. These homes are referred to as being “Pre-FIRM”. Their rates have been subsidized over the years.

The NFIP flood insurance program has announced a rate increase of generally 10% (varies depending on the flood zone) that affects everyone. Everyone will also see a new charge of 5% to cover the Reserve Fund assessment. Preferred Risk policies in zones X, B or C are exempt from these two increases

The effect of the changes on the other NFIP policyholders will depend on their circumstances:

  • 81% of the policyholders are paying the correct actuarially-determined rate.
  • 5% of policyholders are paying a subsidized pre-FIRM rate. These are pre-FIRM non-primary residences, business properties and Severe Repetitive Loss policies. Their rates will be increasing by 25% per year until the true premium is reached.
  • Not all subsidized policies will see large increases. Obtaining an Elevation Certificate is the best way to determine the true premium. Some premiums will decline, some will stay about the same, some will see a moderate increase and some a large increase. Without an Elevation Certificate, one cannot evaluate the true risk. Note: if you have a Preferred Flood Policy now, this does not apply.
  • 10% of the policies are for primary residences. These policies for pre-FIRM homes will continue to be subsidized until the home is sold or the policy lapses.
  • 4% of the policyholders are in pre-firm condos and multi-family buildings that are primary residences. Their subsidies will continue until FEMA develops guidance for removing the subsidies.

If you need to have an Elevation Certificate, it must be completed and signed by a licensed surveyor. It will certify the elevation of the lowest floor of your home or business. This is especially important if your structure is in a high-risk flood area. A photo of the structure must accompany the Elevation Certificate.

The rate increase will go into effect on October 1, 2013, except for Non-Primary residence polices that went into effect January 1, 2013. This includes units in condominiums and multi-family dwellings.

As you can see, the rules are not straightforward and can vary due to the type building, age of the building, flood zone and more. The general elevation of an area is important, as is the elevation of your building’s slab compared to the elevation of the middle of the road.

It is said that about 20% of all flood losses do not take place in a flood zone. The devastating Colorado floods occurred in an area that was considered low-hazard. We have many areas like that in Palm Beach County. Some are along A1A and some are further inland. In some cases, Preferred Risk policies can be written on homes in these areas at a greatly reduced premium.

For information or advice on this important coverage, please call us at 561-276-6055 or 800-272-6055 or email

Barbara Gracey Backer
Barbara Gracey Backer

Barbara Gracey Backer is the Vice-President of Gracey-Backer, Inc., an Insurance Agency in Delray Beach, Florida specializing in All Lines of Professional and Personal Insurance. She may be contacted at (561) 404-5746 or at

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