Steep Hike in Flood Insurance Rates Strikes Rural Areas

Steep Hike in Flood Insurance Rates Strikes Rural Areas



Steep Hike in Flood Insurance Rates Strikes Rural Areas

The flood insurance program has tremendous effects on homeowners and real estate agents particularly in the rural areas and some urban parts of Sacramento-San Joaquin Delta. The cost of the insurance coverage is high and is increasing by the day since it has quadrupled in some cases. The high costs have adverse effects on the real estate business because the agents are forced to devalue their property because the insurance costs are prohibitory. The seller has the option of discounting the property or waiting for the law to reform.

The new law is part of the Biggert-Waters Flood Insurance Reform Act. Its intention is to replace the National Flood Insurance Program, which was sinking into debt due to high expenses from natural disasters. The act primarily aims at eliminating established subsidies of flood insurance, which result in cheap insurance for risk properties that are affected by disasters and have to be rebuilt. However, the act has proved to be too costly since property owners have to pay high premiums for the insurance. Consequently, the author of the act, Rep. Maxine Waters along 59 other Democratic and Republican co-sponsors across the nation wants to reform the legislation.

The law is already in effect since the first phase kicked off on January 1, when rates increased in business and rental properties, and vocational homes. This translates to an annual increase of 25 percent until attainment of the actuarial rate. In 2014, more changes are expected to take place as more people including all homeowners in special flood hazard areas will be expected to comply. The rates have also created tension and anxiety since a state proposal to construct two huge water diversion tunnels has threatened the livelihoods and property of the people. The project is expected to eat into thousands of acres of land.

Flood insurance is mandatory for property owners since banks require it when issuing farm loans and mortgages. This makes it hard for the real estate business because they find difficulties selling property due to such restrictions. Additional changes in the law require that agricultural structures including parking sheds, barns, and silos are insured at the actuarial rate. The new insurance policies are unfavorable to both agriculture and business because the flood insurance can sum up to 15percent of the building’s value annually. Thus, in about 10 years, insurance costs will be much higher than the value of the building.

Many people are now opting to pay off their mortgage in order to avoid the burden of flood insurance, a worrying trend that will negatively affect the National Flood Insurance Program. More people will depend on disaster relief in case of a flood instead of paying insurance premiums to support the program. Therefore, bill co-sponsors are pushing to reform the law so that it considers actual risk and not potential flood depth since not all areas in flood hazard zones are affected by floods (Weiser, 2013).

The article relates to environmental problems, their causes and sustainability. To some extent, floods are inevitable, and their causes could be artificial or natural. Therefore, having a strategic plan that will help people recover from the losses caused by floods such as rebuilding of buildings is essential. In this case, the flood insurance cover serves as the most preferable measure to help people recover their lost property. Hence, the flood cover is mandatory to all property owners.


Weiser, M. (2013). Steep hike in flood insurance rates strikes rural areas. The Sacramento Bee. Retrieved on 18 Nov. 2013 from

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