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Flood policy rates to go up

06/28/2010

By GERARD SHIELDS
Advocate Washington bureau
Published: Jun 28, 2010
 
The U.S. House passed legislation last week to extend the National Flood Insurance Program. But U.S. Rep. Rodney Alexander, R-Quitman, recently issued a warning to policyholders about their rates.
 
The Federal Emergency Management Agency will issue new flood maps. FEMA announced that it is extending what it calls the preferred-risk policy flood insurance rates to two years from the date that the new maps go into effect.
 
Once the new flood maps come out, everyone declared to be in a special flood hazard area will be required to purchase flood insurance immediately, Alexander said.
 
Those who do not purchase flood insurance before the maps are out and who are in the special flood zone will be required to buy flood insurance at the preferred-risk rates, which are the lowest.
 
However, after the two-year period expires, rates will be raised to standard rates, which Alexander said are extremely high rates.
 
“FEMA’s new two-year policy is similar to a sub-prime adjustable rate mortgage,” Alexander said in a statement. “You will briefly get a teaser rate before it balloons into a rate substantially more expensive.”
 
“The opportune time to consider your risk is now, not after the maps and insurance rates go into effect,” he said.
 
Alexander is recommending that people in the program contact their insurance agents to discuss options and determine the most effective and cost-efficient route.
 
Compiled by Gerard Shields, chief of The Advocate’s Washington bureau.