Flood Insurance Rates Go Up, Surcharges in Effect

By Briana Vannozzi

Homeowners in shore towns like Belmar, hit hard by Hurricane Sandy’s path, want to know why their premiums for flood insurance plans are going up when they’re still working out claims for damage sustained from the storm more than two years ago.

“The house behind us is a great example of a family that paid into the flood insurance policy, paid into their premiums for eight to 10 years before Sandy, and now was essentially denied their claim for the foundation that’s being done,” said Belmar Mayor Matt Doherty.

As part of the Homeowners Flood Insurance Affordability Act, new rates and policies go into effect starting today. The legislation is intended to offset spikes that would have been even higher from a previous federal reform. But it still means more money out of policy holder’s pockets.

A primary residence, which includes single family and individual condo units, will see a surcharge of $25. Everyone else, non-primary residence, multi-family and non-residential will be charged $250.

That’s a flat fee and doesn’t change regardless of your plan’s premium. According to FEMA, which oversees the program, surcharges go into effect when your policy is up for renewal. It also applies to renters’ insurance. Christine O’Brien, the president of Insurance Council of New Jersey explains the changes.

“The trade off is you’ll pay a surcharge to help pay down the debt of $24 billion of the NFIP — the National Flood Insurance Program — which up until now has been subsidizing flood insurance premiums so that they were affordable.”

She’s talking about national debt that ballooned after losses from Hurricane Katrina and Sandy, where many policy holders’ plans didn’t reflect the actual risk of coastal living and were supported by federal subsidies that kept their rates lower. Under this new plan, the average premium could rise up to 18 percent, but vacation, rental and commercial properties could go up to 25 percent in increases.

“We’ve seen an increase in maybe $6,700 on average where people were paying maybe $700 to $800 for flood and are paying now between $1,200 and $1,800 for flood so is it an increase? Yes. Could it double what you’re paying? Yes, but is it still affordable based on what you’re insuring. I would like to think it’s worth it,” O’Brien said.

But what about those homeowners who still aren’t back in, who’s cases have been denied? We pressed FEMA today.

“Believe me we understand and empathize and understand their plight. What we are doing is we have now created the Office of Insurance Advocacy out of our headquarters to handle any of these types of concerns. So what I would suggest is I would refer them to the office of our advocacy so that their concern can be heard and addressed on a case by case basis,” said Bill McDonald of FEMA.

The new legislation does permit grandfathering, which means anyone whose home was built after 1975 can keep their current rating and not be reassessed. But for those with homes built prior, it could be a tough pill to swallow.