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Horror story: compounded flood insurance premiums - Ocean City Sentinel: News

Horror story: compounded flood insurance premiums

Stop FEMA Now spokesman urges citizens to be insured, check out legislation

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Posted: Wednesday, August 28, 2019 11:23 am

OCEAN CITY – After George Kasimos’s Toms River property sustained serious damage from Hurricane Sandy in 2012, he rebuilt his house.

Months afterwards, he discovered he had to raise the house or pay higher flood insurance premiums. Unknown to Kasimos at the time, the National Flood Insurance Program (NFIP), run by the Federal Emergency Management Agency (FEMA), changed the flood zone designation where he lived. 

Kasimos said his flood insurance would rise from $1,000 to $30,000 annually.

In 2013, he started Stop FEMA Now to combat flood insurance premium hikes as the result of the Biggert-Waters Act of 2012. The homeowner advocacy group fights for reductions in elevation requirements of the FEMA maps, and lower flood insurance premiums. 

Kasimos was on hand Aug. 24 at the Ocean City Free Public Library to outline two federal bills that could either help or hinder property owners looking to lower their flood insurance premiums. 

Ocean City Flood Committee Chair Suzanne Hornick said she invited Kasimos to give homeowners hit with increased flood insurance premiums information about changes at FEMA. 

“Personally, from everything I read it scares me to death and I would much rather have information that’s correct than what I read on Facebook,” Hornick said. 

Congress created the NFIP in 1968. Flood insurance was subsidized to encourage homeowners then the program initially started. Every four years Congress needs to reauthorize the NFIP. 

Congress must reauthorize the NFIP before it expires after Sept. 30. 

Kasimos said the NFIP is more than $25 billion in debt.

To deal with this debt, the House introduced H.R. 3167, the National Flood Insurance Program Reauthorization Act of 2019 in June. Sponsored by Rep. Maxine Waters (D-Cal) the legislation includes an 18 percent to 25 percent compounded yearly increases for flood insurance premiums. The premiums would double every three to four years. 

Primary homes will receive up to 18 percent compounded yearly increase, until they reach their “actuarial rate.”

The actuarial rate is an estimate of the expected value of future losses. 

Second homes, investment properties, and commercial property owners will receive up to 25 percent compounded yearly increase, until they reach their actuarial rate. 

Rep. Frank Pallone (D-NJ), Rep. Bill Pascrell (D-NJ), and Rep. Clay Higgins (R-La) introduced the National Flood Insurance Program Reauthorization and Reform Act of 2019. Under this proposal, premium increases are capped at 9 percent compounded yearly increases. 

“Our biggest challenge with the House legislation is it’s not affordable. In fact, homeowner premiums will likely double every four years and possibly sooner than that,” Sen. Robert Menendez (D-NJ) said during a July 16 press conference. 

Kasimos said FEMA is implementing “Risk Rating 2.0” in October 2020. Risk Rating 2.0 will calculate premiums based on a number of “logical rating variables,” including the distance from a home to the coast or water source, different types of potential flooding and the cost to rebuild a home. Under the existing system, all homes located in a FEMA-designated “flood plain” pay the same premium.

“Risk Rating 2.0 will change the way risk is calculated. If you’re closer to the water, you’re going to be paying more money, even if the property is elevated,” Kasimos said, adding FEMA has not publicly shared information about the increased rates. “One of the things we’re trying to get FEMA to do is disclose what the actuarial rate is.” 

He said the more information about flood insurance premium changes is available at www.stopfemanow.com. 

Kasimos shared horror stories about one homeowner who dropped his $3,800 flood insurance before Hurricane Sandy, went to sell his home and was hit with a $32,000 flood insurance premium. 

“I’ve heard this story hundreds of times and it’s going to be occurring significantly more,” Kasimos said. 

He also said a man from Muncy, Pa. has a $60,000 home and his annual flood insurance premium increased from $600 to $9,000.

Kasimos said the biggest flood insurance bill he’s seen was $65,000 for a $250,000 policy. 

“Every four years this home will be a total loss to FEMA. It has never flooded,” Kasimos said. “It’s not fair.”

Kasimos said many towns with significant flood policies are passing resolutions opposed to the 18 to 25 percent premium increases. Towns that have passed resolutions in New Jersey include Berkley, Brick, Toms River, Lacey Township, Lincoln Park, Ocean Gate, Point Pleasant Boro in New Jersey and Monroe County and Key West in Florida. 

He suggested Ocean City residents call their mayor and council and request they approve such a resolution.

Kasimos said there are 22,000 Flood Zone Communities located in all 50 states.

“If we all speak together, we can make a little bit of a change,” Kasimos said.

Homeowners who want to learn their actuarial rates can go online to www.truefloodrate.com.

“I think personally the closer you live to the water even if you’re elevated, your premiums are going to rise. Are they going to rise crazy? Probably not, but if you have an older pre-FIRM home and you live near the water, Risk Rating 2.0 is just going to exacerbate your premiums. They’re going to make them higher,” Kasimos said.

Pre-FIRM buildings are those where construction or improvements occurred before Dec. 31, 1974, or before the effective date of an initial Flood Insurance Rate Map (FIRM).

William McMahon III, president of McMahon Insurance Agency, said Waters’ legislation raises flood insurance premiums to deal with FEMA’s debt. 

“The program is $25 billion in the hole. They’re broke. So they are getting 5 percent rate increases. The ones that are not subsidized are going up higher,” McMahon said. 

McMahon recommended property owners get elevation certificates on their homes to save money. 

“If you don’t have an elevation certificate it’s worth the money to invest in it. If it’s not worth it this year it may be worth it two or three years down the road. When you go to sell your house it’s nice to have,” McMahon said. 

Kasimos suggested ways flood insurance premiums can be lowered: 

• make sure flood agent rates homes correctly

• make sure there are no mistakes on elevation certificate

• raise deductible or remove content insurance

• raise mechanicals (boiler, electric panel, condensers) above the Base Flood Elevation

• add certified flood vents

• backfill crawl spaces or basements

• elevate homes above Base Flood Elevation 

“I suggest everybody get flood insurance because if you’re not in a flood zone, it’s a few hundred dollars a year,” Kasimos said. “Eighty percent of the people who flood throughout the country do not have flood insurance and don’t live in a flood zone.” 

Kasimos said Ocean City is doing a lot to help reduce flood insurance. The city has undertaken an island-wide flood mitigation program that includes elevating streets, installing pumping stations and replacing old drainage pipes. 

“They spend a lot of money to mitigate flooding and the more you spend the more you help the community, the lower your premiums are going to go,” Kasimos said.

Justin O’Leary, deputy chief of staff for Rep. Jeff Van Drew, said the public should support Pallone’s legislation. 

“Going forward we’re going to continue to fight on this issue. We can always use help and input,” O’Leary said. “We have two competing bills in the House. We support Chairman Pallone’s bill. Chairwoman Waters’ bill does not fix a lot of things and there are a number of problems if that bill goes forward for areas like ours. You’ve got to apply pressure.”

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