The next storm heading for the Jersey Shore will begin to hit coastal homeowners today. This time it won’t come with rain and wind, but with new surcharges and rate increases that will appear on flood insurance bills.
The Homeowner Flood Insurance Affordability Act of 2014, which goes into effect today, will include premium increases of up to 18 percent for primary homeowners and 25 percent for those who own vacation homes or rental properties. A new surcharge will also be assessed.
“It’s not going to be as cheap as it was,” said Christine O’Brien, president of the Insurance Council of New Jersey. “I can’t emphasize enough that homeowners should talk to their agents about policies and educate themselves about what their options are.”
O’Brien noted that the surcharges and premium increases have been put in place because the National Flood Insurance Program is $24 billion in debt, in large part due to losses incurred during Hurricane Katrina and superstorm Sandy. Rates charged to many policy holders do not reflect the actual risk of coastal living, and about 20 percent are supported by subsidies that keep rates lower.
Here are three facts about the flood insurance changes that take place today:
•All property owners will be required to pay a surcharge. It’s $25 for primary homeowners and $250 for people who own vacation, or secondary homes, as well as commercial property. The money is to be used to help pay down the flood insurance program’s debt. It is supposed to be eliminated when all subsidies on policies have disappeared.
“The big increases are coming to the non-primary homeowners, who have vacation homes or rentals,” said Michael Hill, president of the John Hill Agency in Berkeley. “If they are buying a vacation home for the first time, many people don’t know about it.”
There are 23,414 active flood insurance policies in Monmouth County, and 52,986 in Ocean County.
•Flood insurance rates are going to rise, especially for homeowners with subsidized policies. The Federal Emergency Management Agency, which runs the NFIP, says annual premiums for primary homeowners should not rise more than 18 percent, and most will go up much less than that. But vacation and rental homes and commercial properties will face bigger increases – up to 25 percent, as will homes where there has been more than one incident of flooding.
The Flood Insurance Affordability Act modifies 2012 insurance reforms that required even steeper premium increases.
•Maximum residential deductible limits are being raised from $5,000 to $10,000. The higher deductible policies are expected to be up to 40 percent cheaper, but would likely have to approved by your lender, according to insurance experts.
The flood insurance premium and rate increases are a bitter pill for many coastal homeowners, who blame the National Flood Insurance Program and the insurance companies that handle their policies for underpaying claims after Sandy and undermining their ability to rebuild without relying primarily on disaster aid.
Kimberle Ely, of Brick, is one of those homeowners who is questioning why policyholders like herself are being asked to pay more in premiums for flood coverage that didn’t adequately cover the flood damage to her home.
“The insurance (companies) used many tactics to not pay or lowball the payouts. Just look at the engineers reports that were changed,” Ely told the Press on Tuesday.
O’Brien, of the Insurance Council, said homeowners can lower insurance increases by elevating their homes if they can afford it.
“You won’t see that big spike,” O’Brien said. “But then you have to factor in the cost of mitigation. (But) It is still better to try to mitigate your risk as much as possible. You’ll see savings in the end.”
Have an opinion on the proposed flood zone maps?
The comment period for preliminary Flood Insurance Rate Maps (FIRMs) opens today or Friday, depending on the town, for Monmouth and Ocean counties. You can review the maps and file comments or appeals through FEMA’s www.Region2Coastal.com website.