After much concern about the direction of flood insurance rates and their impact on the real estate market, President Obama signed the Homeowner Flood Insurance Affordability Act into law on March 21st 2014. This law added amendments to the 2012 Biggert Waters Law.

New Limits On Federal Flood Insurance Rates

Flood InsuranceThis law marks a big change over earlier versions of the Biggert-Waters Flood Insurance Reform Act of 2012. Previous plans would have stopped any potential increases while FEMA did an assessment of the affordability. Instead the bill has returned federal flood insurance rates to pre-2012 levels, and also stopped increases in the future. There is a small assessment, which has been added to all National Flood Insurance Program policies, that’s designed to make up lost revenue. This will end when owners are paying the full cost of FEMA flood insurance.  Specific amendments to the law are as follows:

  • In flood areas where properties were built to code, ‘grandfathering’ of insurance policies is restored.
  • Any premium increases above 18-25% will now be refunded to homeowners.
  • Future premium increases are now limited to 18%, for houses built after 1975, and 25% for those built before 1975.
  • The property sales trigger, which requires a purchaser of a house to pay full risk premiums at the time of the purchase, was repealed.

The bill does go further, and provides refunds, and makes more permanent changes to the law. But if gives FEMA 8-16 months to make these changes themselves through regulation. In most cases, owners will not see any change to the their insurance renewal prices & quotes straight away.  Here’s a more thorough rundown of other changes in the new law:

Flood Insurance Rates Changes

  • FEMA has between 8-16 months to issue new rate tables.
  • FEMA must directly refund policy holders who have paid premiums higher than the new rate tables. But they won’t refund until FEMA issues the new rate tables/instructions.
  • Property owners are allowed to buy a policy at the existing rate, until FEMA has implemented these changes.


  • Grandfathering of properties is restored. For example, any building built to the standards of zone A, will keep the rate for zone A, even if the property is remapped to zone B on the flood insurance rate map in the future.

Anual Premium Increase Limits

  • The limit on the average increase in each flood zone is reduced to 15%, from 20%.
  • A new limit has been introduced that states that no property owner can pay an increase of over 18% annually, with the following exceptions:
    • Houses built before 1975 and first homes, no more than 18% (but no less than 5%).
    • Second homes or commercial properties, 25% increase maximum annual increase.
    • Houses built after 1975, no more than 18%, even if second home or commercial property.

Other New Rules

  • Introduction of $25 annual assessment charge per policy on NFIP first homes. $250 charge on NFIP second homes, or commercial properties. When everyone is paying full risk rates, this expires.
  • Monthly payments of federal flood insurance will now be allowed.
  • Allowed deductible for homes will be up to $10,000.
  • Detached structures are now excluded from mandatory flood insurance under the NFIP. But lender can still require it.
  • The rate increase threshold for home improvements will increase to 50% (up from 30%).
  • FEMA will be allowed to continue excluding flood proofed basements from their rate calculations. (Only in communities where home owners require protection from extreme weather.)
  • Property sale & new policy triggers for full risk premium rates removed.

The passage of this law is great news for the U.S. housing market.  Millions of homeowners who were facing devastating premium increases by Biggert-Waters have gotten a temporary reprieve.  Rates still could see significant increases over time, however, with allowed annual increases of 18-25%.

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