Federal Flood Insurance for Texas Residents Expected to Rise
According to industry experts Texas homeowners that live outside of a 100-year floodplain can get full coverage for about $450 per year, which includes $250,000 for structural damage and $100,000 for your personal possessions.
Federal flood insurance is expected to get dramatically more expensive for thousands of homeowners who live in the Houston area as Congress overhauls the federal flood program that is currently billions of dollars in debt.
The National Flood Insurance Program (NFIP) is $24.6 billion in debt and is struggling to stay solvent. In Harrison and Galveston counties, the program covers roughly 300,000 homes.
Congress took their first stab at fixing the program back in 2012, but the reforms sent rates soaring in certain areas and it ended up being repealed. This year the five-year extension which congress put in place is set to expire which means Congress will finally have to tackle the problem.
There is currently no plan in place but it seems very probable that will rates will rise, especially in areas that are prone to flooding.
These statistics show how important the NFIP program is both nationwide and in the Houston area:
- Nationwide NFIP policies – 5.01 million
- NFIP policies in Texas – 606,052
- NFIP policies in Harris County – 254,780
- Nationwide NFIP claims paid – $56.7 billion
- NFIP claims paid in Texas – $6.8 billion
- NFIP claims paid in In Harris County – $3.05 billion
Rates Vary Depending on Location
Rates can vary dramatically depending on where your home is located. According to industry experts homeowners that live outside of a 100-year floodplain can get full coverage for about $450 per year, which includes $250,000 for structural damage and $100,000 for your personal possessions.
Those prices jump dramatically if you live inside the 100-year floodplain. Even with mitigation measures such as a raised foundation you will be paying roughly $3,200 per year for flood insurance, which includes a $2,000 deductible. If you live on the coast in Galveston you can expect to pay roughly $8,000 per year.
These rates will only be headed up as more and more subsidies are taken away and homeowners will be responsible for the cost of flooding damage insurance.
While Congress has been avoiding this issue since 2008, the five-year extension that passed in 2012 is now coming to an end so something will have to be done and most experts predict rates will be headed up.
Claims Have Soared
The National Flood Insurance Program is in deep debt due to the fact that flood related claims have soared over the years. In fact, all but two of the 15 most expensive flood related events have occurred since 2000. Hurricane Katrina is number one with a total cost of $16.3 billion, SuperStorm Sandy is in the number two spot with $8.4 billion and Hurricane Ike rounds out the top three with $2.7 billion in damage.
Texas has not been immune to flooding issues. We experienced torrential rains that flooded Houston and other parts of Texas in 2015 and 2016, which ranked 14th and 15th on the most expensive flood insurance events list. According to state climatologists the rains are only going to get worse, increasing the chances for further flood damage.
FEMA Buyouts May Help
FEMA has funded buyouts of high-risk properties that have had repetitive flood insurance claims. In Harris County, FEMA has funded roughly 2,000 buyouts since 1985, the majority of them in the hundred-year floodplain.
Buying up properties tends to be more cost-effective than paying out flood related claims over and over on the same property. FEMA has also funded improvements such as raising foundations. According to state documents, roughly 1,860 repetitive loss properties in Harris County have benefited from risk mitigation.
However, funding for improvements may be drying off as President Trump’s administration proposes cutting 11% from FEMA’s 2017 budget. The Flood Hazard Mitigation Program was specifically named in the budget as being earmarked for reduction or elimination.
What the Future Will Bring
There is no telling exactly how Congress will deal with the issue of flood insurance but one thing is almost a certainty, rates will be going up as private insurers step into the market price.
According to news reports, U.S. Rep. Ted Poe, R-Kingwood sent a letter to his constituents that said that Congressional committees are starting to work on flood insurance renewal, and that “preliminary plans allow private insurers greater and easier access to the marketplace.”
As private insurers take over for the federal program, subsidies will certainly be eliminated and they will charge rates that reflect the true risk of insuring flood prone properties. All of this means that homeowners in flood prone areas and on the coast can expect their rates to be headed up in the next few years.
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