The high cost of coastal living: Flood insurance premiums keep rising
As the cost of coastal residency climbs, we wonder how the American Shoreline will be changed.
MARSHFIELD — Laurie Futch has never put in a flood insurance claim in the 33 years she’s lived in her Marshfield home, but she pays about $900 a year for a policy that only insures the $32,000 she still owes on her mortgage.
Kevin Mann, of Marshfield, a town located up the coast from Plymouth, filed several flood insurance claims during the last few years and said his policy has spiked to nearly $5,000 annually, even though insurance didn’t cover much of the damage and loss of belongings.
Down the street, Stephen Bartlett has seen his flood insurance policy go up only $214 in the last seven years to just more than $1,070, which gets him the maximum coverage of $250,000.
It’s been nearly six years since policy changes and major revisions to flood maps — the federal documents that determine which homeowners must buy often expensive flood insurance policies — sparked panic among coastal residents afraid of being forced out of their homes by the cost of insurance premiums.
Others coastal homeowners worried about spending down their savings trying to protect homes far from the beach from floodwaters that had never even come close to them before.
For some, those fears have come true, resulting in skyrocketing insurance bills. But many others have found ways to adapt to the added cost of life on the coast.
Some homeowners have found lower rates in the private flood insurance market, while others have elevated their homes above the flood zone to avoid having to buy insurance. Many have kept premiums down by refusing to file claims when their homes are damaged by flooding, and there are even anecdotes about homeowners paying off their mortgages early simply to dodge the flood insurance mandate altogether.
“For a lot of property owners, I think solutions have been found to concerns and issues they had, both for mapping and insurance,” said Joe Rossi, chairman of the Massachusetts Coastal Coalition.
Others have not been so lucky, particularly those who own older second homes or put in numerous claims for flood damage. For some, the cost of insurance has gone up gradually 25 percent each year. Others have gotten hit with huge increases of as much as tens of thousands of dollars when they went to renew policies after putting in claims and therefore changing rate tables.
“We’re getting more and more calls from people saying, ‘I either fix this, or I’m selling my house,’” Rossi, a flood insurance specialist with Rogers and Gray Insurance, said. “For some properties, if the increases continue and if the rate structures stay the same, we’ll see the same issues bubbling up again.”
The federal flood insurance program, started in 1956, became a hot-button issue in the area in 2013 when the Federal Emergency Management Agency released new flood maps. Flood maps help set insurance rates and determine which owners are required to buy flood insurance if they have federally backed mortgages. Later maps for other South Shore communities also caused an uproar.
At the same time, homeowners also started feeling the effects of the Biggert-Waters Flood Insurance Reform Act of 2012, which eliminated flood insurance subsidies and caused premiums to soar for some homeowners. A relief act later repealed some provisions of Biggert-Waters and capped the annual flood insurance increases for many property owners.
Pat and Michael Gendron moved into their home in August 2013 and took over the existing mandatory flood insurance policy to the tune of about $4,500. At the time, Pat Gendron told The Patriot Ledger she was a “nervous wreck” about the potential changes to flood insurance that threatened to drive up the cost of their policy.
The retired couple put in the first-ever flood insurance claim on the property less than two years later after waves pummeled their home during a winter storm and damaged their deck, stairs and door, allowing some water to get in.
The property sustained similar damage in 2017, but the Gendrons heeded the warning of an insurance adjuster and paid for the repairs out of pocket, rather than putting in another claim.
“We’ve put in one claim, and we don’t plan to put in any more,” Michael Gendron said with a chuckle.
The couple’s annual premium has gone up about $1,000 in the last six years, Michael Gendron said, and they’ve reduced their coverage. They say the cost is still manageable, and not something they’re overly concerned about.
“If you’re going to live on the water, you have to go with the flow,” Pat Gendron said.
The Gendrons have kept their policy from skyrocketing by avoiding putting in flood insurance claims. The hardest hit in terms of flood insurance premiums are properties classified as “severe repetitive loss property” – meaning they have had at least four claims of more than $5,000 each, or at least two claims totaling the structure’s current value. Rossi said there are more than 36,000 severe repetitive loss properties in the flood program nationally.
Mann said he likely falls into that category, having put through several claims between 2014 and 2017 when the marsh behind his property filled with water and flooded his home due to a sea wall breach. He is required to carry flood insurance because he has a federally backed mortgage, and said his policy has gradually gone up year after year, now costing more than $400 a month.
“It’s ridiculous because (flood insurance) doesn’t cover anything. You think you’re all set, but it’s so limited in the coverage,” he said. “It’s a nightmare. We don’t even put through claims anymore.”
While it’s not a solution for all property owners, Rossi said the private flood insurance market has provided another option that is sometimes more affordable than the National Flood Insurance Program. He said 120 companies offer private flood insurance policies, twice the number of two years ago.
But Rossi acknowledges that private insurance won’t work for all properties, especially those categorized as high risk to flooding and damage. Rossi said there are about 600,000 private flood policies nationally, compared with more than 5 million policies in the National Flood Insurance Program.
Another option for property owners who have faced high insurance costs is to get out of the flood zone altogether by elevating their homes. Rossi said he’s seeing more properties get elevated than ever before thanks to legislative changes that have helped encourage homeowners to raise their homes.
As part of the Disaster Recovery Reform Act of 2018, 6 percent of disaster funding is set aside for mitigation, which helps pay for grants to elevate high-risk homes. Rossi said that translates to as much as $2 billion a year for pre-disaster mitigation.
“We weren’t there six or seven years ago, but our understanding of these issues as an industry is so much better,” Rossi said.
Going forward, Rossi said he’s hopeful as legislators, experts and stakeholders work on a complete overhaul of the National Flood Insurance Program, which has been in limbo since it first expired in October 2017.
A dozen short-term extensions have kept it alive since then, and President Donald Trump recently signed another extension until September. Lapses in January and March were the first lapses in the program since 2010.
The Federal Emergency Management Agency, or FEMA, announced this spring that it is revamping its flood risk-rating system to create insurance rates that more accurately reflect a property’s unique risk of flooding. The program, called “Risk Rating 2.0” would go into effect in October 2020.
Rossi said FEMA would use data from a variety of sources to develop a comprehensive understanding of flood risk that applies to individual buildings, rather than areas as a whole.
“We’ve been rating structures the same way for 50 years, but risk is not static, it changes over time, and we are getting a better sense of what that means,” Rossi said. “A lot of people might be concerned or scared, but I’m cautiously optimistic that more premiums will go down than go up. It takes a lot more rating factors into consideration than the current program.”
Rossi said it will also be easier for property owners to project out to see how much their insurance will cost in five or 10 years, and then plan accordingly.
While grandfathered, subsidized rates will also be gradually phased out, Rossi said he doesn’t think it will have the devastating impact that some people fear.
“Your grandfathered policy might actually be more expensive than what your actual rate should be,” he said. “I think most of what will happen with be flat with no immediate change, or a benefit to the rating of the structure.”
But some residents remain skeptical. Futch, the Island Street resident, said she’d have to elevate her home at least 8 feet to comply with the flood maps or pay high rates if it weren’t for her grandfathered rate.
“At this point, I’m looking to sell in the next two years,” she said. “I don’t want to end up with property I can’t sell.”