Most homeowner’s insurance policies don’t protect owners against flooding. For this reason, many people in flood-prone areas obtain insurance through the federal government’s flood insurance program.
But thanks to a new law, flood insurance rates are set to go up, and in some cases they will see a dramatic increase. Here’s why: In the past, many people who obtained flood insurance received lower rates due to government subsidies.
In effect, they were “grandfathered” at older rates that didn’t reflect the true risk of flood damage to the property. Back in 1968, the government adopted new minimum construction standards designed to minimize flood damage.
But many pre-1968 buildings that didn’t meet the new standards were allowed to be “grandfathered” and pay lower rates as though they met the new requirements. [Read more...]