Flood insurance rates on the rise

Flood insurance rates on the rise (CBS2/FOX28)

Unlike most insurance, flood coverage is run by the government.

The National Flood Insurance Program (NIFP) was created to prevent private companies from denying coverage to people at high risk.

However, the cost of recovering from floods far outweighs what they are collecting.

According to the Federal Emergency Management Agency (FEMA) "The discount premium structure in place did not allow the NIFP to generate sufficient revenue from policyholders to cover the losses experienced from hurricanes Katrina (2005) and Sandy (2012). As a result of the losses experienced in those events the NIFP now carries $24.6 billion in debt to the Department of Treasury."

Huge losses prompted the program to change who it deems as high risk or non-preferred.

“Preferred to non-preferred ratings is a tremendous difference in the premium,” says Mitch Graybill, Personal Lines Supervisor at Millhiser Smith Agency. “You could have an $800 policy be $3000 - $4000.”

Further changes to policy prevent that drastic increase from coming all at once.

“Effective this year you were seeing increases that go up to 18% per year for standard home flood policy and then for non-primary residences or businesses they'll increase up to 25% each year and that will continue until the true risk rating is found,” says Graybill.

However, he says the standard home owner will likely only see increases closer to 6% this year.

Now as some NIFP regulations are set to expire even bigger changes are likely ahead.

“Those will likely, as all changes do when it comes to insurance, will have a trickle-down effect that will drastically affect the consumer more than anything,”

While nobody wants to see higher rates Graybill adds that if nothing was done the program run out of money to pay claims entirely.

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