WHEELING - Skyrocketing flood insurance premiums resulting from a new federal law could be devastating for many local homeowners if Congress doesn't act soon to correct the problem, area insurance professionals predict.
Legislation signed into law last summer extended the FEMA-run National Flood Insurance Program through 2017, but also revamped it - with potentially dire consequences for flood-prone neighborhoods such as Wheeling Island and those along Big Wheeling Creek.
Created in 1968, NFIP is supposed to be self-sustaining, but is mired in about $25 billion in debt, largely because of disasters such as Hurricane Katrina in 2005, Hurricane Ike in 2008 and Superstorm Sandy last year that resulted in massive numbers of claims.
Photo by Ian Hicks
Wheeling Island is one of many local flood-prone neighborhoods where property values may be threatened by the Biggert-Waters Flood Insurance Reform and Modernization Act of 2012.
That's where the Biggert-Waters Flood Insurance Reform and Modernization Act of 2012 comes in.
The law basically eliminates lower, "subsidized" premiums for flood-prone properties and phases in "full-risk" premiums - which in some cases can be six to 15 times higher than pre-Biggert-Waters rates, according to local insurance agent Bernie Glenn.
Many of its provisions took effect Oct. 1.
There's a push to repeal the law - but for now, it's the law of the land.
The impact won't be as sudden for people who continue to live in their homes: The law caps annual premium increases at 20 percent, unless an owner allows his policy to lapse. Where the law's effects are most likely to be felt is in the real estate market, because new policies automatically carry the full-risk rate.
Glenn said neighborhoods in Wheeling that can expect to be impacted include Wheeling Island, portions of South and Center Wheeling, southern Warwood and neighborhoods along Wheeling Creek - Fulton, Pleasanton, Dimmeydale, Mil Acres and portions of Elm Grove.
"It's pretty bad for our community, and for a lot of other ones," he said "It makes your home unresellable."
Commercial properties will see annual premium increases of up to 25 percent until they reach full-risk rates, as will non-primary residences such as vacation homes.
"Predictions in commercial rates are between $10,000 and $35,000 a year," Glenn said. "These are people that are paying $2,000 to $5,000 right now."
Another local insurance agent, Gayle Seidler, recently obtained a quote of $6,000 per year to insure a home on Valley View Avenue - a policy that would have cost about $1,000 annually before Biggert-Waters, she estimated. But the house right next door might only have gone up a few hundred dollars under the law. The only way to know for sure is to pay a professional surveyor and obtain an elevation certificate, which can cost $300 to $700, sometimes more.
"We can't even provide a quote without it," Seidler said of the elevation certificate.
Most potential homebuyers won't be inclined to pay that kind of money just to find out whether they can afford to insure a property, so the onus is likely to fall on the seller.
"The trickle-down effect it's going to have is going to devastate house sales if they don't do something to cap the increases," Seidler said.
The federal government only requires borrowers to have flood insurance up to the value of their loan - so if you're looking to buy a home in an affected area, Seidler recommends financing as little as possible. Banks may have their own requirements, however.
As property owners around the country see their bills swell, the push is on to delay premium hikes for four years to allow for study on how Biggert-Waters can be implemented effectively. Even one of the bill's namesakes, Rep. Maxine Waters, D-Calif., is supporting legislation introduced this week in the House which would do just that.
"They were supposed to complete a feasibility study before the law was enacted, but they didn't have the money or the manpower to do it, so they didn't do it," Glenn said. "The question is, if they don't have to comply with the law, how can they expect everyone else to?"
Both Glenn and Seidler said they're telling their customers to make their voices heard on the issue.
"Write your legislators - that's what I would recommend," Seidler said. "I'm absolutely sure that when they passed this law they did not have a clear picture of all the things that would be affected."