When a flood insurance rate map is updated by FEMA, some property owners may find that their property has been moved from an X flood zone, which has a relatively low chance of flood loss, to an A flood zone, which has a high risk of flood loss. These property owners will receive notification from their mortgage company that flood insurance is now required. These properties are eligible for a Preferred Risk Policy Eligibility Extension, which is low-cost policy. The premiums are based as if the home was still in an X zone. At the moment, these properties remain eligible for Preferred Risk Policy Eligibility Extension policies and their low premiums. However, changes to the National Flood Insurance Program coming in April of 2015 will lead to higher premiums.
Current Preferred Risk Policy Eligibility Extension policies and policies for buildings newly mapped into high risk areas from low risk areas will be eligible for Preferred Risk Policy rates for one year after the new map becomes effective. The Federal Policy Fee on these policies will be increased to $45 to ensure the solvency and sustainability of the National Flood Insurance Program.
At renewal, these policies will increase by no more than 18% per year until the premium reaches its full actuarial rate. However, grandfathering remains an option. Once the policy reaches the grandfathered X zone rates, the policyholder will be given the option of taking the grandfathered X zone rates which will probably be the best premium available for pre-FIRM homes. In some cases, if the home is positively elevated, the full actuarial rates may be less than the grandfathered X zone rates but an elevation certificate will be needed to determine if that is the case.
If you have any questions on Preferred Risk Policy Eligibility Extension or flood insurance in general, please feel free to contact The Russell Agency at 203.255.2877.