BY LIZA STROUT - Gasparilla Islanders are about to see an increase in their flood insurance rates. For some, the increase in premiums will be substantial.
The Biggert-Waters Flood Act goes into effect nationwide on Oct. 1, at which point flood insurance rates will begin to increase until they reach a point of being actuarially sound.
“The NFIP (National Flood Insurance Program, administered by Federal Emergency Management Agency) has been running in the red for years,” said Nat Italiano, in the Boca Grande office of Italiano Insurance. “There are a lot of homes that have been paying subsidized rates for flood insurance since the Flood Insurance Act went into effect.”
Basically, properties that were built before the initial Flood Insurance Rate Map (FIRM) went into effect have received subsidized rates.
In 2012, the NFIP paid $3.69 billion out for claims in the state of Florida, far less than policy holders paid in. Florida has 38 percent of all policies issued under the program, more than any other state.
According to Italiano, there will be two categories of changes that will affect area homeowners.
The first are properties that are covered by policies that were in effect before July 6, 2012.
Pre-FIRM buildings that are secondary homes will have a premium increase of 25 percent each year until the premium is considered adequate.
Primary homes, where the owner lives at least 80 percent of the year, will see NFIP rates go up by anywhere from six to 17 percent per year, the normal NFIP rate increase, depending on which zone the homes are in.
Then there are pre-FIRM homes that will be covered by policies that begin or are transferred after the Oct. 1 date.
Those structures will be subject to full-risk rating on their next renewal on or after Oct. 1. The owners will be required to provide, at their own expense, an elevation certificate. These certificates are created by licensed surveyors and cost around $300.
Homes will then be re-rated according to their actual elevation and flood zone.
There are two zones on Gasparilla Island. Zone A is a special hazard flood zone and includes most of the houses on the island, but beachfront houses are in Zone V. The V is for wave velocity. It is also a special flood zone, considered the most hazardous and expensive of the zones.
In order for a property to be insured at a reasonable rate, it has to be elevated at or above the Base Flood Elevation (BFE). For Gasparilla Island, that height is from 13 feet on the beach to 10 feet on some parts of Boca Grande Isles.
Post-FIRM properties in Zone V must be elevated on pilings, piers or posts, and any enclosure of the under-house area cannot be used for a living space. It can be, at most, 300 square feet and must have break-away walls. The enclosure will still have a higher rate, even if it is used only for parking, storage or as an entryway.
Properties in Zone A have the same restrictions, with one exception: As long as there is proper venting and the structure is only used for storage, parking and entryway into the building, your rate will not increase.
Richy Edwards and the crew of Key Agency recently attended a four-hour class on the upcoming changes.
“It blew us away,” said Edwards. “I know flood insurance very, very well, and we were all floored. This will affect Gasparilla Island heavily because of the seasonal residents. They will be taking the brunt of the immediate increases.”
He used the homes on the “pirate streets” at the south end of the island as examples.
“Those are all Zone A properties, and a lot of them were built in the ’70s and ’80s at ground level,” he said. “All of the newer houses, those are built on pilings. Some of the newer homes on pilings reflect the reference level for the new rates. Someone who has been paying around $2,000 a year could see a gradual increase to $14,000 a year or even more. If the owner lets the insurance lapse or the house is sold or the policy is moved to a new company, the increase will be immediate.”
Edwards explained that there are still a lot of loose ends at the federal level, and that the measure is being put into place incrementally. There are also changes in the way the insurance is handled that have nothing to do with the amount.
“One of the things that they are discussing is to allow people to finance their NFIP annual premium,” he said. “They will be letting you make payments, instead of all at once.”
Also, if there is a mortgage through an FDIC-backed financial institution, in July 2014 the institution will be required to escrow the flood insurance payments, which means that in addition to the amount of the mortgage, one-twelfth of the annual flood insurance premium will be added to the monthly payment.
“The feds are also going to be holding the lending institutions more accountable in their auditing,” he said. “Right now, the fines are more of a slap on the wrist. Those will be going up substantially as well.”
New rates were scheduled to be announced on June 28. If you are considering purchasing flood insurance, Edwards advises that you do it before the new law goes into effect on Oct. 1.
“That way, you can use the pre-FIRM rates as your base for premium increases,” he explained. “If you purchase a policy after that date, you will pay the full actuarial amount from the time you get your policy.”For more information, contact your local insurance representative or go to fema.gov/national-flood-insurance-program.
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