The Real Deal: Flood Insurance Premiums Sky-High
Updated: Friday, August 2 2013, 10:24 PM EDT
BENNINGTON - Irene, Lee and Sandy may have caused a lot of physical damage and destruction but now it looks like even homeowners who were spared will have to pay more when it comes to their flood insurance premiums.
The hurricanes drained the Federal Flood Insurance Program and now those who are required to have that insurance may have to pay double for it regardless of whether they’ve ever had a claim.
Bill Wood and his wife have owned a home along a creek that empties into the Walloomsac River in Bennington, Vermont for 27 years. The home has never flooded but because it’s in a flood zone, Wood is required by his lender to have flood insurance. “It's almost 5 times what my homeowner's policy is,” says Wood, of the price of his premiums. In 2006, his flood insurance premiums were $821, over the past 6 years they have gone up to $1,932, “it just keeps going up... where is it going to stop?” he wonders.
It likely won’t stop going up. The head of FEMA has warned that those paying hundreds of dollars now, should expect to pay thousands of dollars over the course of the next four years, and those already paying thousands, “ it's going to become unaffordable,” says John Murray who is the President and CEO of Rose & Kiernan Inc., in East Greenbush.
“As long as we choose to rebuild in places that traditionally have flooded, we have an issue of adverse selection when it comes to flood insurance,” Murray adds. Meaning only people who need it buy it, so the risk pool will likely never be big enough to lower rates. “I think we have to look at construction types, code compliances, building materials, other ways to mitigate some of this--on the way we construct homes or try to loss-control as much as we can and then still have a fund for catastrophic events,” says Murray.
For Wood though, if he could move away from water and out of a flood zone he would, “If I could sell the house, but I'm not sure how many buyers would be willing to take a risk, knowing there's your mortgage, your taxes, and a $1900 bill facing you,” he says.