House Flood Insurance Bill Would Raise Costs for Vacation Rentals
Vacation rental owners who need flood insurance can expect to pay more under a bill passed this week in the US House of Representatives. As reported in the Washington Post, this legislation would phase out subsidies on some vacation homes and raise premiums at a faster rate. The bill would also increase the amount of coverage a property owner can buy and boosts fines for mortgage lenders who don't tell customers they have to buy flood insurance.
The article by Jill Abrams describes the history of the National Flood insurance Program, a part of the Federal Emergency Management Agency, which was established by Congress in 1968 to help homeowners, particularly those living in flood plains, obtain flood insurance that private insurers were unwilling to offer. Under the program, private insurers sell the government-subsidized policies.
The Flood Insurance Program was self-supporting for its first 37 years, but last year it was hit by claims from some 225,000 property owners for $22 billion arising from hurricanes Katrina, Rita and others.
Currently, a homeowner living outside a flood plain with the maximum coverage and a $500 deductible pays a premium of about $1,100 annually. The premium for the same coverage inside a flood plain is about $2,000. The bill adds to basic policies a nominal amount for living expenses following a flood.
For more information about the flood insurance program, check this FEMA website. More information about the House passed bill, H.R. 4973, is available on the Congressional website.
For vacation home owners who live in areas that are flood-prone, this legislation is more bad news about their insurance rates. Home insurance has become increasingly more difficult to get and more expensive for second-home owners who live with 50 miles or even 100 miles of a coast. This legislation to phase out the subsidy for flood insurance for second homes will exacerbate this problem for beach houses and many other vacations rentals.
© 2006 The
