Congress OKs Limits on Flood-Insurance Premiums

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WASHINGTON -- Congress is sending President Barack Obama a bill to ease big flood insurance premium increases faced by hundreds of thousands of homeowners and allow below-market rates to be passed on to people buying homes with taxpayer-subsidized policies. The measure breezed through the Senate and on to Obama's desk Thursday on a 72-22 vote. The House passed it last week.

The legislation significantly rewrites a major overhaul of the flood insurance program passed two years ago. The 2012 changes were aimed at weaning hundreds of thousands of homeowners off of subsidized rates and required extensive updating of flood maps used to set premiums. But its implementation has stirred anxiety among many homeowners along the Atlantic and Gulf coasts and in flood plains, many of whom are threatened with unaffordable rate increases.

The bill would:
• Limit annual increases of any individual policy under the National Flood Insurance Program to no more than 18 percent.
• Direct the Federal Emergency Management Agency to have "an affordability target" that would seek to limit the cost of a flood insurance policy to 1 percent of a home's total coverage amount.

In 2012 the Biggert-Waters Flood Insurance Reform Act was passed in an effort to set premiums at a rate consistent with the actual risk of living in flood-prone areas. The act came in the wake of a $24 billion deficit in the flood insurance program, which serves about 5 million people and was strained by the cost of Hurricane Katrina in 2005. Shortly after enactment of the 2012 law, Hurricane Sandy hammered much of the U.S. Northeastern coast, generating another wave of insurance claims. (Pictured above, Seaside, N.J., as Sandy made landfall on October 30, 2012.)

That law did not stipulate that rates would soar by more than 10 times, but that is what happened to the surprise of lawmakers and consternation of homeowners and small businesses.
The head of the Federal Emergency Management Agency testified before Congress in 2013 that he was concerned about the poor and middle class being "priced out of their homes." But he said that FEMA's hands would be tied until Congress acted to change the Biggert-Waters Act.

For those in flood zones, the slideshow below looks at the kinds of properties currently affected by the Biggert-Waters Flood Insurance Reform Act.

Reuters and AOL Real Estate contributed to this report.

Properties at Risk of Insurance Rate Hikes
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Congress OKs Limits on Flood-Insurance Premiums

Vacation homes began losing their subsidies in January 2013, with premiums set to rise by 25 percent yearly until they reach their actual market rates.

Pictured: A vacation home on Cedar Bonnet Island, N.J., that was damaged by the storm surge from Hurricane Sandy.

Flood insurance subsidies would end for newly purchased properties, or properties where the flood insurance had been allowed to lapse.

Along with primary residences, businesses began losing their subsidies on Oct. 1, 2013.

Pictured: Businesses left empty or boarded up three months after Hurricane Sandy hit in the Rockaways section of New York.

Homes that suffer flood damage exceeding their "fair market value."

Pictured: A hurricane-damaged home in Scituate, Mass.

Homes that repeatedly suffer severe losses ("four or more claims payments of over $5,000 or two claims that exceed the value of the property").

Pictured: Hurricane Rita floodwaters pass under a damaged house built on stilts in Orange, Texas, in 2005 -- four weeks after Hurricane Katrina hit the Gulf Coast.

Properties in which the cost of repairing damages or of recent improvements exceeds "30 percent of the fair market value of the property."

Pictured: This house in New Orleans' Lower Ninth Ward, which was hard-hit by Hurricane Katrina, was rebuilt and elevated according to new flood rules.


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