Floods are very common in the United States, causing damage that amounts to billions of dollars every year. After having to pay out many claims, the National Flood Insurance Program ended up in financial trouble, and the Biggert-Waters Flood Insurance Reform Act was passed in 2012. This act allowed the premiums to spike up to tenfold for properties that are situated in flood risk areas. To prevent these spikes, Obama signed the Homeowner Flood Insurance Affordability Act in 2014. 


Current Flood Insurance Requirements

The new bill doesn’t change the requirements for who needs to be insured. 

High Risk Areas: Buildings and houses situated in high-risk areas with mortgages from federally insured lenders have to have flood insurance. High-risk areas have a one in four chance of experiencing a flood in a 30-year mortgage period.

Moderate to Low Risk Areas: Properties situated in moderate to low flood risk areas typically don’t need to be insured against flooding. Flood insurance for these areas is, however, highly recommended, as floods can affect anybody and a quarter of all NFIP claims are from these lower risk areas. 

Your flood insurance premium is calculated according to your risk profile, which is determined by FEMA. To determine which area you fall into, you can have a look at Floodsmart. Another website that provides valuable information on flood insurance and what it entails is moneytips.com.

Limiting Premium Increases
The main reason for instigating this new bill is to limit high premiums. Thanks to the Homeowner Flood Insurance Affordability Act, premium increases are limited to an average of about 15 percent per year for each of FEMA’s nine different property categories. The act specifies that no policyholder should receive a premium increase of more than 18 percent per annum. The act calls on FEMA to keep the premium for most policyholders under 1 percent of the total value of the coverage. This means a premium of about $1,500 for a $150,000 policy.

Reducing Impact of New Flood Maps

Under Biggert-Waters, many property owners of houses that used to fall outside of a flood risk area suddenly faced huge premium increases when the flood maps were updated. The new bill rewards homes that previously complied with the older flood maps by limiting the increases if they now fall in an area with a greater flood risk. 

New House Ownership

Biggert-Waters had a huge effect on the real estate market after July 2012, requiring an immediate adjustment to actuarial levels as soon as a property was sold to new owners. This greatly affected house sales in communities where FEMA maps indicated a high flood risk. The new bill brings an end to this and provides refunds on premiums for homeowners who purchased properties after July 2012 and discovered that the change in ownership brought an end to subsidized insurance. 

Working with the Community

Through the Homeowner Flood Insurance Affordability Act, FEMA has to get input from local communities while completing the new flood maps. It has to take other locally funded flood protection into account, as well as non-federal levees. In addition, FEMA has to conduct research on how to keep the program affordable, while moving to make it more solvent.


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