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Flood Insurance Premiums Force Houses to Go Up!

According to a recent article written by Bruce Siceloff in the News & Observer, flood insurance premiums are increasing dramatically on the coast of North Carolina. Sybil and Bill West are ready to move inland to be closer to their family but are stuck in their beach cottage because of flood insurance premiums. They have had lots of interest in their home, including two signed contracts but the potential buyers have been scared off by the much higher flood insurance premiums mandated by Congress and the Federal Emergency Management Agency.

The Siceloff writes, "With the National Flood Insurance Program running a $24 billion deficit after huge payouts from Hurricanes Katrina in 2005 and Sandy in 2012, Congress in 2012 ordered radical changes to make premiums more closely reflect the true risk of damage for Americans who insured property in floodplains near rivers and along the coast."

The law began taking shape in 2012 and FEMA's implementation has been criticized by NC Sen. Kay Hagan and Reps. Walter Jones and Mike McIntyre, who are requesting a delay.

The article goes on to say, "The loudest support for action to stall the insurance changes has come from New Jersey, Louisiana and other states where the impacts are showing up more quickly than in North Carolina. In states where flood insurance rate maps were updated last year, homeowners quickly learned what their new rates would be. The picture for most policyholders in North Carolina will become clearer as new flood maps start rolling out this Spring."

The Wests currently pay $850 a year for flood insurance but experts have predicted that with the new law they could reach as high as $21,000 a year.

Siceloff interviewed Sybil West who said, "We had two contracts, and both of them crashed because of this uncertainty. I'm alarmed because I think this law is going to cause problems all across the coastal United States. It puts us in a bind, and it puts buyers in a bind."

The solution to avoiding paying these high premiums is to have the home elevated above the base flood elevation line. The article says, "Each building is assigned a base flood elevation, measured in feet above sea level. Policyholders are penalized for buildings constructed lower than the base flood elevation, because they are more likely to flood. They receive discounts for every foot they build higher than the base elevation."

But that still leaves homeowners with uncertainty. How high should they go and will the laws change in the future?

Siceloff writes that, "Spencer Rogers helps coastal residents make sense of the new law in his role as a construction and erosion specialist for N.C. Sea Grant, a coastal research and education program."

Pointing out a nearby house to Siceloff he says, "The waterfront house was built in 2006 in a Harbor Island neighborhood then governed by the less-severe AE flood rating. It was constructed 5 feet above the base elevation, so the owner received a discount on the insurance: $600 a year instead of the standard $3,600 rate. But when new flood maps were published in 2007, the neighborhood was reclassified under the more severe VE rating. Now the same house is 3 feet below the base flood elevation, Rogers said. The annual payment will be phased in over five years to a new premium of about $21,000."

“We don’t know what’s coming,” Rogers said. “It’s against federal policy now to put (the expected) sea-level rise into flood maps, but the law says FEMA must decide how to deal with sea-level rise. That could easily add another foot, or it could add 3 feet, based on some forecasts.

“As long as those kinds of uncertainties are out there, it’s really hard to know what to do – other than to build as high as you can get away with. Clearly, higher is better.”

One thing is certain, homes must go up to avoid paying higher premiums.