Waterfront property in Seattle is one of the most attractive features of the area. Who else but waterfront homeowners have the chance to skip a horrendous commute and get to work by water taxi? Who else gets a gorgeous lake view that’s right outside the window? Who else has the luxury of being accessible to fireboats in the event of a fire? Yet despite all of these advantages, one persistent difficulty facing the waterfront real estate owner is the possibility of a flood. That’s why recent discussions and decisions about flood insurance policies are important to understand.
Extension of National Flood Insurance Program
Last July, the National Association of Realtors hailed the federal government’s decision to extend the National Flood Insurance Program, or NFIP. The NFIP, originally created in 1968, was a response to the need for some kind of national flood insurance, as typical homeowner’s insurance doesn’t cover flooding, hurricanes, tropical storms, or heavy rains. The extension is positive because it will continue its function as a means for people with waterfront property to remain insured in the event of a flood. However, the most recent extension came with some changes that current or future owners of waterfront houses should know.
Changes to the NFIP
The Federal Emergency Management Agency, or FEMA, is responsible for responding to disasters like floods. Unfortunately, officials from FEMA recently explained that there will be increases in premiums and rate structures in order to help the agency get on more solid financial ground. Because of a high number of catastrophic storms in the recent past, FEMA has a debt load of $24 billion to overcome. One change will be on “severe repetitive loss properties,” which are the ones in the most dangerous position of having repeated loss due to flooding. About 600,000 current owners of a primary residence won’t see increases until their policy lapses or they sell to someone else. These are the properties with subsidies. About 80 percent of flood policies aren’t subsidized, so they won’t see any changes aside from routine rate increases each year.
What the Changes Mean to You
These changes are hardly a cause for alarm. Unless your home is located within a Flood Insurance Rate Map (FIRM) area, you’ll continue to have a highly affordable flood insurance rate. In fact, half of all flood policy claims are found in just five metropolitan areas, which are New Orleans, Houston, Tampa, Miami, and New York. That means your likelihood of a flooding problem in a waterfront home off of Lake Washington or Puget Sound is probably quite low. Even so, it’s important to note that these changes are coming and react accordingly. As a buyer, you should focus on waterfront real estate located outside of any FIRMs. Current owners should take stock of what their situation is, keeping in mind that most changes will be phased in gradually starting in 2014. Sellers simply need to remember to disclose information about these changes to any buyers.