25 percent Increase Talking Points
1
Non-Principal/Primary Residence Rated as a Single Family Dwelling January 1, 2013 Rate Increase Talking Points Background: On July 6, 2012, the Biggert-Waters Flood Insurance Reform Act of 2012 was signed into law. Among other provisions, this Act phases out subsidized rates for single family dwellings that are not the primary residence of the named insured(s). These properties will no longer receive reduced premium rates for flood insurance, and the annual premium rates must increase by 25 percent a year until they reflect the full risk of flood loss. 1. What policies fall under this new law? All NFIP policies written under the Dwelling Form as a single family dwelling, including residential unit owners located in residential condominium buildings, that are not the principal/primary residence of the named insured that is rated pre-FIRM (subsidized rates) and located in a Special Flood Hazard Area (SFHA) – Flood Zones A, AE, A1-A30, AO, AH, D, V, VE or V1-V30. 2. What’s considered a non-primary residence? FEMA defines a non-principal/primary residence as a building that will not be lived in by the insured or the insured’s spouse for at least 80% of the 365 days following the policy effective date. 3. Why not 2-4 family or non-residential properties? Effective August 1, 2013, the NFIP will also begin to eliminate subsidized premiums for other buildings as mandated by Biggert-Waters Flood Insurance Reform Act of 2012 which will include 2-4 and non-residential properties. 4. What if the policy is wrong and it is the insured’s principal/primary residence? If the insured notifies you that the policy in question is their principal/primary residence as defined above, we would need an endorsement request or a signed statement to correct the policy. Coming soon an enhancement to our website will allow agents to complete the endorsement online. 5. Is there any way to reduce the premium? a. Deductible: The insured could increase their deductible – however, if they have a mortgagee they should check to see how high of a deductible is allowed. **Note, an insured can increase their deductible at renewal or mid-term; however, they can only reduce their deductible at renewal and only mid-term if the lender sends a letter requiring the deductible to be lowered. See the NFIP Manual for rules (RATE 12). b. Elevation Certificate: If we can rate the policy with Post-FIRM rates which are not subsidized, this may lower their premium. For a Pre-FIRM building to be eligible for Post-FIRM rates an elevation certificate would have to show the lowest floor for rating is at or above the Base Flood Elevation (BFE). Be careful, elevation certificates can be expensive and if the elevation certificate does not provide a better rate, we cannot use it. So be sure to inform the insured that getting an elevation certificate does not guarantee we can use it.
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Transcript of 25 percent Increase Talking Points
Non-Principal/Primary Residence Rated as a Single Family Dwelling
January 1, 2013 Rate Increase
Talking Points
Background:
On July 6, 2012, the Biggert-Waters Flood Insurance Reform Act of 2012 was signed into law. Among other
provisions, this Act phases out subsidized rates for single family dwellings that are not the primary residence of the
named insured(s). These properties will no longer receive reduced premium rates for flood insurance, and the annual
premium rates must increase by 25 percent a year until they reflect the full risk of flood loss.
1. What policies fall under this new law? All NFIP policies written under the Dwelling Form as a single family dwelling, including residential unit owners located in residential condominium buildings, that are not the principal/primary residence of the named insured that is rated pre-FIRM (subsidized rates) and located in a Special Flood Hazard Area (SFHA) – Flood Zones A, AE, A1-A30, AO, AH, D, V, VE or V1-V30.
2. What’s considered a non-primary residence? FEMA defines a non-principal/primary residence as a building that will not be lived in by the insured or the insured’s spouse for at least 80% of the 365 days following the policy effective date.
3. Why not 2-4 family or non-residential properties? Effective August 1, 2013, the NFIP will also begin to
eliminate subsidized premiums for other buildings as mandated by Biggert-Waters Flood Insurance Reform Act of 2012 which will include 2-4 and non-residential properties.
4. What if the policy is wrong and it is the insured’s principal/primary residence? If the insured notifies
you that the policy in question is their principal/primary residence as defined above, we would need an endorsement request or a signed statement to correct the policy. Coming soon an enhancement to our website will allow agents to complete the endorsement online.
5. Is there any way to reduce the premium?
a. Deductible: The insured could increase their deductible – however, if they have a mortgagee they should check to see how high of a deductible is allowed. **Note, an insured can increase their deductible at renewal or mid-term; however, they can only reduce their deductible at renewal and only mid-term if the lender sends a letter requiring the deductible to be lowered. See the NFIP Manual for rules (RATE 12).
b. Elevation Certificate: If we can rate the policy with Post-FIRM rates which are not subsidized, this may lower their premium. For a Pre-FIRM building to be eligible for Post-FIRM rates an elevation certificate would have to show the lowest floor for rating is at or above the Base Flood Elevation (BFE). Be careful, elevation certificates can be expensive and if the elevation certificate does not provide a better rate, we cannot use it. So be sure to inform the insured that getting an elevation certificate does not guarantee we can use it.
