Bad news-flood insurance to double in 5 years (mortgage, home)

[cupper3]

With the Senate easily passing an increase in flood insurance, it looks like the rates will double in 5 years.

How will that:

a) affect already depressed housing prices in flood areas, or will buyers just ignore it and look for the view?

b) will the opt into the flood insurance program drop, and therefore a self-fulfilling prophecy of needing increased rates because there are a lower number of owners being part of the program?

Thoughts?

[lavender]

Another problem we property owners have to deal with because of people elected representatives who kowtow to interest groups who fund their party coffers.
U r right we will suffer in an already stagnant market. Many will not be able tom opt out as banks will insist on it. Watch for banks to step into I surname market!!!

[chi_tino]

I'm not sure what lavender is trying to say, especially since realtors are one of the largest special interest groups in the country.

Let's put the politics aside for a moment and instead look at the numbers.

Since the rates for flood insurance are GROSSLY below the actuarial cost, anyone who drops their Federal flood insurance is a fool (and their mortgage company is not going to be happy, either).

My waterfront premium for the next year (which cost me about 0.5% of the total coverage) is an incredible bargain. Even if prices doubled, it would be far cheaper than the alternatives.

If I owned my home outright, I would cancel my wind policy before my flood policy.

The problem is when people in a flood zone who refuse to insure their property receive Federal disaster aid dollars. That sets up the moral hazard: why buy insurance if the government is going to bail you out anyway?

[BucFan]

I've been purchasing FEMA $250 premium insurance for the last two years, but don't think I need it (not in flood zone, not near river, about 10 miles inland. I think they're giving me an incentive to cancel -

[BBI]

Originally Posted by avb3

With the Senate easily passing an increase in flood insurance, it looks like the rates will double in 5 years.

You should re-read the story you posted. The senate passed an re-authorization of and extension to the NFIP program. The senate did not pass an increase in flood insurance rates (and, generally, I don't think that's the senate's job; the NFIP is administered by FEMA).

Along with the extension, the new legislation would allow the feds to raise rates by 15% per year. So it's theoretically possible under the new legislation that rates double in 5 years. But, today, the feds can increase rates by 10% per year. And it's not as if rates (for most of us) are increasing 10% per year now, so there's not much reason to think they'll increase by 15% per year later.

It's certainly possible that someone will try to make the NFIP actuarially sound. But I haven't heard any politician actually state that goal.

All in, this isn't the big deal you're making it out to be.

[lavender]

Ha ha auto correct goes mad on iPad. Last sentence makes no sense. But the largest special interest group are the policy holders that's you and me. Still comes down to the fact that I have paid out fifteen to twenty thousand the last ten years and have received no money back. Which i am glad about in reality Car ins oh about fifty thousand that's a lot of dollars in peace of mind.

[stpeteguy]

If I still paid a mortgage , that would bother me.

But since i'm strategically defaulting, this sort of news does not bother me at all.

good times.