As part of the Biggert Waters Flood Insurance Reform Act of 2012, owners of subsidized policies on properties that have experienced severe or repeated flooding may see a 25 percent rate increase annually, beginning October 1 until rates reflect true flood risk.
The Act was passed to keep the National Flood Insurance Program financially stable after an onslaught of claims from Hurricane Katrina in 2005. It effectively removes federal subsidies from properties in flood zones.
Owners of subsidized policies on business and non-residential properties in special flood hazard areas may also increase 25 percent annually beginning October 1 until those rates reflect true flood risk.
Eliminating the subsidies means the federal government won’t have to continue borrowing money to pay for the insurance.
Rate hikes will be phased in over time for those with primary residencies. Larger hikes will take effect for those insuring secondary homes or homes that have recently sold.
FEMA says the phase-out of subsidies will affect fewer than 20 percent of flood policyholders nationwide.
