Changes to NFIP Flood Insurance Manual Are In Effect
Batten Down the Hatches – Changes to NFIP Flood Insurance Manual Are In Effect
It’s time to navigate the waters of the recent changes to the National Flood Insurance Program (NFIP) Flood Insurance Manual! Just in time for hurricane season, the Federal Emergency Management Agency (FEMA) rolled out several changes to the manual which may affect your new applicants and existing borrowers, who have the Homeowners Flood Insurance Affordability Act of 2014 and the Biggert-Waters Flood Insurance Reform Act of 2012 to thank. The changes are effective as of April 1, 2015.
Key changes include the following:
- Premium increase limitations – Individual premiums cannot increase more than 18% and average rate class increases are limited to 15%. There are exceptions to the limitation, including mis-rating and increase in coverage.
- Congressionally mandated surcharges – A mandatory surcharge of $25 will be charged for all new and renewed policies for primary residences while a $250 surcharge will be charged for policies for all other property types, including but not limited to non-primary residences, non-residential property, condominiums, and multi-family buildings. The surcharges also apply to primary and non-primary residences newly mapped into a Special Flood Hazard Area (SFHA).
- New deductible structures – Policies for residential properties may now include a $10,000 deductible as long as the deductible is the same for building and contents coverage. Insurers must include language on the insurance application or a separate disclosure clearly explaining this deductible option makes the policyholder responsible for damage up to the deductible amount.
As a result of the congressionally mandated surcharges, insurers are now required to validate primary residence eligibility by collecting the applicant’s driver’s license, auto registration, proof of vehicle insurance, voter registration, Homestead Tax Credit form, or documentation identifying where the applicant’s children attend school. In the absence of these documents, FEMA allows for the completion of a formal statement signed and dated by the applicant. A primary residence is defined as the residence where the applicant resides at least 50% of 365 days following the policy effective date.
It is important to note the premium increase limitation applies only to the premium and does not count the congressionally mandated surcharge, probation surcharge, or federal policy fee, so, although the premium may only increase so much, the surcharge and fees will also add to the applicant’s total cost.
The NFIP Flood Insurance Manual changes include additional changes to new minimum deductibles for Preferred Risk Policies and Mortgage Portfolio Protection Program policies, as well as changes to the federal policy fee assessment and Newly Mapped Procedures. As always, there are exceptions to some of the changes listed above, so be sure to check out the free four-part video series and a free copy of the April 2015 version of the NFIP Flood Insurance Manual provided by FEMA at:
Manual – https://www.fema.gov/media-library/assets/documents/103209
For additional information contact the author Julie J. Mixtacki at jmixtacki@fosaudit.com.
Biggert-Waters Flood Insurance Reform Act of 2012 | Changes to NFIP Flood Insurance Manual Are In Effect | Homeowners Flood Insurance Affordability Act of 2014 | Julie J. Mixtacki