State law seeks to mitigate flood insurance spikes

On July 23, the governor signed a bill intended to help control the growing cost of flood insurance for homeowners.

The legislation, which was co-sponsored by House Speaker Robert DeLeo and Attorney General Martha Coakley, prohibits any creditor from requiring a homeowner to purchase flood insurance in an amount exceeding the value of the mortgage. It also prohibits a creditor from requiring flood insurance on the contents of a home or requiring a deductible below $5,000.

The legislation was filed in response to the federal Biggert-Waters Flood Insurance Reform Act of 2012, which was intended to make the National Flood Insurance Program more sustainable. The federal law, however, forced many homeowner insurance rates to increase dramatically in order to more accurately reflect the true risk of a flood event.

In March, President Barack Obama signed the Homeowner Flood Insurance Affordability Act, which offered some relief to homeowners and businesses facing spikes in flood insurance premiums. The two U.S. senators from Massachusetts, Elizabeth Warren and Ed Markey, as well as the entire Massachusetts congressional delegation, were strong advocates of the legislation.

The Homeowner Flood Insurance Affordability Act holds premium increases for homeowners to an average of 15 percent per year, and provides that no individual policyholder will pay a premium increase of greater than 18 percent per year.

The federal act also reinstates the flood insurance program’s grandfathering provision, meaning that homes that complied with previous flood maps from the Federal Emergency Management Agency will not face large increases when new maps, showing larger flood risks, are implemented by the agency.