FEMA Discounts Flood Insurance for Homeowners Affected by Remapping

May 24, 2010

Homeowners across the United States who are concerned that they may be required to purchase flood insurance due to a recent push to redraw floodplain maps can relax a little; they’re being offered the mandatory coverage at a deep discount for two years.

Senator Dick Durbin of Illinois said recently that the Federal Emergency Management Agency(FEMA)’s decision to offer lower rates on properties affected by changes to the flood maps significantly reduces the financial impact to property owners in southwestern Illinois and other affected regions, at least for now.

FEMA has agreed that up to two years’ eligibility for the National Flood Insurance Program’s lowest-priced option, the Preferred Risk Policy, will be offered to small businesses and homeowners on any land that falls into the newly designated special flood hazard areas. Once the redrawn maps take effect – either this fall or early next year – those rates will be available.

The savings provided by the special rates are not insignificant. The yearly premium for a homeowner under the preferred risk program is around $300, as opposed to the $1,200 – $1,500 premium they might pay otherwise, said Les Sterman, an administrator of a flood-protection district that includes three Illinois counties near St. Louis.

Sterman said that the lower premiums, “… are quite reasonable, and everyone in the area should buy insurance at those rates. It’s considerable relief to a point, obviously.” He also warned that larger companies will still have to shop the open market for their coverage, at a price he estimates to be about $30 million/year in his region.

In a statement to the press, Senator Durbin said that FEMA’s decision was “…only a temporary solution…” ensuring that homeowners “…will at least be financially protected at an affordable price in the event of a flood.” He said that the long-term solution is “… to bring the levees into a good state of repair.”

For the last six years, FEMA has been working on modernizing their maps, including digitizing levee locations in order for crisis handlers to have instant, electronic access to information about man-made hazards. In the aftermath of 2005’s Hurricane Katrina – and the resultant sharp criticism of FEMA and the Army Corps of Engineers with regard to the levees in New Orleans – the organization grew bolder, offering a lesson about getting serious in fixing the levees.

Currently, FEMA is assessing whether levees can handle a baseline 100-year flood – that’s an inundation so large that there’s only a 1 percent chance of such a flood in any given year. This scenario is FEMA’s threshold for classifying an area as “high risk.”

The agency’s effort has caused angst in many of the country’s levee-protected areas, including Sterman’s district, where there are 64 miles of post WWII levees that were built to weather a 500-year flood – one with a .02 percent likelihood of happening in any given year.

The Army Corps of Engineers, however, believes the Mississippi River defenses in Illinois require hundreds of millions of dollars in repairs and fixes in order to meet FEMA’s standards before the new maps are released and show the levees to be functionally useless, and that’s money and time the agencies in charge of levee management simply don’t have, and such a downgrade would force those homeowners in the region who have federally-backed mortgages to buy flood insurance, even if they’ve never been flooded before.

FEMA’s authority to require the insurance comes from the 42-year-old National Flood Insurance Program that Congress enacted as a result of the public’s inability to get privately backed insurance for flood losses.