Flood Insurance Prices Rise For KY Residents

The Federal Emergency Management Agency announced that Kentucky residents will see higher flood insurance rates this year. Residents in the flood zones in Cumberland County will not only pay more in flood insurance premiums, but both residential and business property owners will also pay additional renewal fees. The changes will also expand the flood zones to include residents who were previously exempt from purchasing federal flood insurance.

How Flood Insurance Works

Residents in flood-prone areas are required to purchase flood insurance as part of their mortgage agreement. These areas often carry a high risk of flooding, so private insurers will not underwrite such a dangerous policy. Instead, homeowners must purchase their flood insurance through the National Flood Insurance Program operated by FEMA. According to a FEMA spokesman, the NFIP is currently $20 billion in debt. The recent changes would include an additional $25 renewal fee for homeowners, as well as a $250 renewal fee for commercial property owners, to cover some of that debt.

New Flood Insurance Law Removes Subsidies

A series of new federal laws also seek to lower the amount of subsidies the government paid into the flood insurance program. The 2012 Biggert-Waters Flood Insurance Reform Act reduced subsidies for homeowners in high-risk areas. The changes led to higher rates for residents in those areas. The next year, the Homeowner Insurance Affordability Act implemented the renewal fees. Since residents in those areas must purchase flood insurance as part of their mortgages, the fees and rate increases are mandatory and non-negotiable.

Changes In Flood Insurance Boundaries, Criteria

FEMA’s changes to the flood insurance boundaries in Kentucky have affected residents statewide. Residents who were required to purchase federal flood insurance will pay higher rates for the same amount of protection. Thousands of their neighbors, who were previously exempt from purchasing flood insurance, will now be required to pay into the NFIP. The changes also include a “lowest elevation grade” factor, which considers how close the first floor or basement is to the site’s flooding level.

Increasing Risks And Costs of Flood Insurance

According to the FEMA website, floods are both the most common and the most expensive natural disasters. The National Flood Insurance Program has paid out almost $40 billion in claims since its launch in 1973. In 2010 alone, the average flood insurance claim was almost $34,000. A FEMA spokesman said that the program was “not designed to be profitable,” but that FEMA must raise its rates just to maintain its current level of coverage.

Source: Insurance News Net

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