By Cathy Possedi, R(S) – One of the “high priority” desires for most buyers in Hawaii is to be in close proximity to the ocean. Before July 2012, agents would remind buyers who were looking for properties near the water of the obvious risks to their home if a natural disaster hit the islands. They would also be required to get flood insurance if they were in a high-risk flood zone area.
While this would be an added cost to the home owner, a large portion of buyers felt the positives of living so close to the water were outweighed by the negatives. They considered the flood insurance premiums a small price to pay for the beautiful views they would get to experience daily.
Unfortunately, recent changes to the National Flood Insurance Program (NFIP) will significantly impact how future buyers shop for their home. Now more than ever, home owners need to know the ramifications of these changes and how it will affect their pocketbooks. Not only will flood insurance premiums increase exponentially for the next several years, but the increase in those rates will undoubtedly be a concern to their buyer when they sell.
Why are Flood Insurance Costs Increasing?
This legislation was a result of the country’s devastating natural disasters over the past 8 years. The costs to the NFIP were unprecedented, resulting in a debt exceeding $24 Billion dollars! So to pay that bill, the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) was signed into law.
In summary, the BW-12 requires re-mapping of flood zones and an increase in flood insurance rates to more accurately reflect the real risk of flooding. Many of the changes were initiated on October 1, 2013.
Insurance increases will depend on:
- The year home was built
- The elevation of the home (determined by an Elevation Certificate–EC)
- What flood zone the home is in, or going to be in if the flood maps are revamped
FAQ – New Flood Insurance for Hawaii Home Owners
Q: What should you do if you are going to buy, or are in the process of buying a home?
1. First thing is to VERIFY the flood zone that the subject property is in. Do not rely on the MLS printouts either, as they are not always accurate or up-to-date. Best sources are:
Please Note: the maps are the same.
2. Next is to look at the Preliminary maps, which are proposed changes to the flood zone maps that could be implemented at any time. IF the property you are considering buying is in the A or V Zones where mandatory flood insurance applies, ask questions.
Ask your Realtor to explain the possible impacts to that property, call an Insurance Agent who has experience writing NFIP Flood Policies, and consult with a Surveyor who is familiar with reading FEMA’s Flood Insurance Rate Maps and doing ECs. Do your due diligence!
Q: What if you own a home that is now in a high-risk flood zone?
Call your insurance agent NOW and find out about how the new laws may affect your home. Your agent can suggest steps for you to take to be proactive about your situation, or possible ways you could lower your current or upcoming flood insurance costs.
Q: What if you are a Seller, or are thinking about listing your home in the near future?
Check out the current and preliminary flood zone maps and also call your insurance company to see how you are currently affected. When you sell your home, be sure to disclose your property’s flood risk based on current effective FEMA Flood Insurance Rate Maps.
While these changes are not good news to home owners, being armed with information can help ease the situation and provide you more options. You may still want to buy that oceanfront home on the North Shore of Oahu, but at least you will have an idea up front what that may cost you in terms of protection.
One Thing to Watch For
Congress has legislation in both the House and Senate to delay changes to the NFIP for 4 years due to massive implementation problems. Keep in mind this will only be a delay. The Honolulu Board of Realtors, along with the National Association of Realtors, are working overtime to push for the delay so current and future home owners have time to understand and prepare for these huge changes.
Receive Updates as they are Announced
For more information or updates as they are announced by the Hawaii DLNR, contact me. I will be happy to provide a free consultation for your home or the home you are thinking about buying, or give you additional resources for further assistance.