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What the Biggert-Waters Flood Insurance Reform Act Means for Communities

On July 6, 2012, the Biggert-Waters Flood Insurance Reform Act of 2012 was signed into law. In addition to reauthorizing the National Flood Insurance Program (NFIP) through September 30, 2017, the bill brings several substantive changes to the program, including several that alter the way premium rates are calculated.

These changes may mean large increases NFIP premiums. It is critical that people repairing and rebuilding structures after storms understand these changes so they can make sound and informed decisions about whether or not they want to place additional resources in harm’s way, and so they can understand the financial implications of doing so. These includes not only questions of rebuilding destroyed homes, but repairing them, too. For example, should people replace a damaged water-heater in their basement, or might they want to consider moving it upstairs? (For guidance on recovering at a community level, be sure to see theNHMA/StormSmart Build Back Safer and Stronger website.)

Following are two big changes to the NFIP everybody recovering from a storm should be aware of:

CHANGE 1: Higher Premiums for Buildings Below the Base Flood Elevation

Congress (via this Biggert-Waters) has instructed FEMA to stop giving premium discounts to properties that are below the BFE, even if they were up to code when built.

CHANGE 2: Pre-FIRM and Grandfathered Rates Phased-Out

In the past, many structures were allowed to keep their original flood-risk rating, even when conditions and improved understanding had changed. This generally occurred when:

  1. The building was built before 1975 or before the community (governing jurisdiction) received its first Flood Insurance Rate Map (FIRM). These buildings have often been insured at Pre-FIRM rates, unless the owner opts out of this option.
  2. The building was built Post-FIRM, in compliance with a FIRM, but a more recent FIRM shows the building to be at greater risk of flooding. These buildings have been grandfathered administratively, and were allowed to keep the rate-class (flood zone and building elevation relative to BFE) that applied at the time of construction.

Both subsidies largely end with the implementation of the Biggert-Waters Act, which specifies that there will no longer be subsidized rates for:

  1. Newly purchased property
  2. Property where NFIP coverage was deliberately allowed to lapse
  3. Properties receiving an offer of mitigation assistance following a major disaster, or in connection with a repetitive loss property
  4. Repetitive loss or severe repetitive loss properties
  5. Businesses
  6. Non-primary residences
  7. Substantially damaged property
  8. Property (at least) 30% improved

In short: Subsidized insurance rates will be phased out for all properties except Pre-FIRM primary residences that have not lost their qualification for therate5]


Final Thoughts on the Flood Insurance Reform Act

The Biggert-Waters Flood Insurance Reform Act is a complex piece of legislation, and it brings big changes. You and your community will be best off getting out ahead of it, rather than trying to adapt to it later. Decisions made now can save homeowners tens of thousands of dollars or more, but only if they have the right information to make good decisions. This page is only an introduction: there’s a bit more information in the footnotes, but if you have specific questions, you’re probably best contacting your state’s NFIP coordinator (find yours here).




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