Flood Insurance Reform Act of 2012

In case you missed it, the Biggert-Waters Flood Reform Act of 2012 (BW-12) was passed by the U.S. Congress in July of last year.  The goal of BW-12 is for the Federal Emergency Management Agency, or FEMA, and other agencies to make changes in how the National Flood Insurance Program (NFIP) is administered.  BW-12 will result in the biggest change to the NFIP in decades as three key provisions are implemented:

  • NFIP will be required to raise flood rates to reflect a property’s true flood risk
  • Make NFIP more financially stable
  • Change how Flood Insurance Rate Map (FIRM) updates impact policyholders

The bottom line is flood insurance rates will increase for some, but not all, policyholders.

To help guide our high level overview of BW-12, I’ll introduce some of the specifics of the program and point you to more information on FEMA’s website.

Who’s Affected:  The two geographical areas that are most affected by the passage of BW-12 are people along:

  • The Missouri River Basin in North & South Dakota, Iowa, Nebraska, Kansas and Missouri
  • The Gulf and Atlantic coasts from the southernmost tip of Texas up through Cape Cod

People in these areas will be placed into various groups such as primary homeowners, secondary homeowners, condo owners, and business owners.  These groups will then be divided into who’s flood policy is subsidized versus non-subsidized and whether they were in a flood area or not, prior to any flood map changes.

Implementation Timeline:  Beginning on January 1, 2013, BW-12 calls for the phasing out all subsidies and discounts on flood insurance premiums.  This date impacts home owners with subsidized flood rates on non-primary homes (beach home, cabin, etc.)

Beginning October 1, 2013, owners of business properties with subsidized flood premiums, as well as, owners of severe repetitive loss properties will see rate increases.

Flood rates for both groups will rise 25% a year, each year until the premiums reflect full risk rates.  The exceptions to the phased premium increase are those persons or businesses that have experienced a lapse in their flood insurance policy, or a new buyer of a home or business property after the passage of BW-12.  People in these cases will pay the full, non-subsidized or discounted flood rate.

Premium Impact:  According to FEMA, about 80% of all flood policyholders will experience no change in premium.  The other 20%, which are usually in an AE or VE flood zone could see significant rate increases.  FEMA provides an example of a home owner with a $250,000 home, $100,000 in contents coverage, and a $1,000 deductible on their website.

Subsidized Premium Rates before BW-12

(AE Zone with no Elevation Certificate)

Premium Rates after the elimination of all subsidies after 10/1/13

(AE Zone with Elevation Certificate)

Lowest floor of property is 4 feet above base flood elevation



Lowest floor of property is at base flood elevation



Lowest floor of property is 4 feet below base flood elevation




The only argument I have with this table is the pre-BW-12 rates are shown with no elevation certificate.  Were the property owner to obtain an elevation certificate the rates could be lower for any home or business that’s 4 feet above the base flood elevation level and that would be a more realistic comparison.

Property owners in VE flood zones (mostly coastal areas) will pay significantly higher premiums that could exceed $20,000 a year in some rare cases.  One home owner in Des Allemands, Louisiana saw his premium increase to $28,000 from $400 the prior year.

Property Owner Options:  Finding out if you’re impacted by BW-12 is a critical first step in determining your response.  This is especially true if you’re property is in an AE or VE flood zone.

  • Have your insurance agent confirm what flood zone you’re in.  This simply requires they review your flood zone determination which was conducted before you bought the policy.
  • If you were previously not in a flood zone but are now being required to have flood insurance due to a map change, find out what your flood zone is from the flood zone determination.
  • Consider having an elevation survey performed by a surveyor qualified to provide one for flood elevation purposes.
  • The survey will show where your lowest floor is in relation to the base flood elevation.  If it’s above, you’ll pay less.  If it’s below the flood elevation, you’ll pay more.
  • If you’re several feet below flood level, consider raising your property to 3 feet above the minimum flood level.  This is an expensive proposition but it may be the best bet to keep your flood premiums lower and assist you in selling your home later.

Before raising your home, be sure to confirm with your home insurance agent that the insurance company will cover your home if it’s on stilts.  Not all companies will write a policy for a home on stilts.

For more information on BW-12, click on the following FEMA link, http://www.fema.gov/flood-insurance-reform-act-2012#1.  Do you have a question, comment, or an experience to share?  Please share them with me in the comments section of our blog or on our Google + and Facebook pages.  We’ll all learn from each other.

Evie Wise
Evie Wise


Evie Wise
Evie Wise

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