Flood Insurance Increases Could Affect Thousands of Missourians

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KANSAS CITY - The U.S. House of Representatives has passed a bill that would stop increases in flood insurance rates for thousands of Missourians. If the U.S. Senate and President do not also approve the bill, at least 16,000 Missourians will see an increase in their flood insurance rates.

The bill delays the Biggert-Waters Act of 2012 by four years.

The Biggert-Waters Act took away flood insurance subsidies established in 1968 under the National Flood Insurance Program. The NFIP's purpose was to make affordable flood insurance generally available through subsidies, thus decreasing the amount of federal assistance being provided in the aftermath of disasters.

"When you think of subsidy think of a lower amount," said Michael Cappannari, FEMA Region VII External Affairs Director.

Cappannari said the problem is these subsidies disguised the true risk of properties, businesses and houses on flood plains. By risk, he means the true value of flood insurance for that property.

After Hurricane Sandy, Hurricane Katrina and other disasters, FEMA was $24 billion in debt.

"Fast forward 45 years to the summer of 2012, July of 2012. In those 45 years, the risk of flood has increased, the consequences of flooding, and ultimately the cost of flooding increased," Cappannari said. "During the years from 1968 forward, there were of course a number of huge flooding events across the nation and as a result the amount of money provided by the NFIP just went up and up and up."

To decrease FEMA's debt, Congress voted to remove flood insurance subsidies in the Biggert-Waters Act of 2012.

Without the subsidies, flood insurances rates would increase 25 percent per year until properties or structures reflect their true risk.

"For certain structures, for secondary residences, the subsidized rates have already begun to be phased out," said Cappannari.

However, there is a different policy for primary residences. If owners bought insurance for their primary homes before July 6, 2012, those insurance rates are grandfathered in until 2016. But, if owners purchased a new flood insurance policy, if the policy lapsed, or if the home was sold after July 6, 2012, that would trigger the new flood insurance rates.

With the delay, all increases, including those for both primary and secondary homes, would stop for four years. According to Cappannari, this gives FEMA time to assess the affordability of the Biggert-Waters Act, which wasn't addressed in 2012 when Congress first passed the bill.

"Currently, there's nothing in the legislation that addresses affordability," Cappannari said.

Twenty percent of the national population that has flood insurance gets some help from the government, or is under the NFIP. That means about 46,000 Americans will experience an increase in their rates. Missouri, however, is above the national average at 40 percent with subsidized rates, which means at least 16,000 of its residents will experience increasing rates. 

"The Missouri River floods," said Tom White, director of the Cooper County Emergency Operation Center. "That's just a fact of life."

White said Cooper County has been successful in encouraging residents in its unincorporated areas to either move out of the flood plain or elevate their houses on stilts above the basic flood elevation line, or BFA. But, he said other areas of Missouri are still in the flood plains and may be hit hard by the increases.

"The north side of the city of Boonville across to Howard County and to the city of Wooldridge are our major concerns every time the Missouri River floods." White said.

He recommends a few options for people who are in flood plains. One is to meet with a contractor to see if you can afford elevating your house.

Both Cappannari and White said a big problem is not many people know about flood insurance or the Biggert-Waters Act.

"There's a lot of background information that people need to do and they need to do it now because this law was passed in 2012 and it was supposed to take effect and now it's in limbo," White said. "There's going to be a lot of people who are going to wake up one day and find out that their rates are going up."

Micheal Clark sells flood insurance for Farmers Insurance. He agrees with Cappannari and White.

"They're going to be surprised," Clark said.

He worries the Biggert-Waters Act may cause the value of homes to go down.

"If it's your second home, I would say you move. But then there's the issue of if you're going to sell your home because you can't afford it and move to a different location. Well if a person wants to buy your home, [he or she] is not going to want to pay for it," Clark said. "They don't want to be at high risk, so your home value, you're not going to get much."

There's also the option of not buying insurance and taking the chance of a flood not happening. But, there's also a problem with that option - if you have a federal mortgage and you're in a flood plain, you must buy flood insurance.

"If it's a low risk, the bank is going to tell you ‘yes, you have to buy flood insurance,'" Clark said. "If it's high risk, obviously the bank is telling you, but you must have it for government regulations. In high risk, you have to have it. There's no saying ‘I don't want it I'll take my chances.'"

Cappannari suggests submitting a LOMA, or Letter of Map Amendment, if you think your home was mistakenly put into a high-risk area on the FEMA maps. That way, FEMA wouldn't require mandatory flood insurance. But, the problem with that option is FEMA may not approve the request.

Cappannari, White and Clark agree the most important step is to stay informed on current legislation, especially if you live in a flood plain.

For more information on flood insurance, visit the FEMA website.