April brings flood of higher premiums Lowcountry sees $25 flood policy surcharge, plus rate hikes for many

About 70,000 property owners in Charleston County buy flood insurance. Higher rates and surcharges for those policyholders took effect April 1.

Workers at Billy Swails’ State Farm office in Mount Pleasant have been on the phone all week calling flood insurance policyholders.

They want property owners to stop by or send in some form of identification to prove where they live.

“It’s costing my office staff a lot of time,” Swails, the town’s former mayor, said. “They are never off the phone anymore.”

The calling campaign is the result of new congressionally mandated rates that took effect this week to help buoy an underwater National Flood Insurance Program, which is $24 billion in debt after costly natural disasters such as hurricanes Katrina and Sandy swamped it with claims.

In Charleston County alone, more than 70,000 property owners have flood policies, according to Karen Jones with the Department of Natural Resources, which administers the federal flood program in South Carolina.

They will all face surcharges, said Rafael Lemaitre with the Federal Emergency Management Agency. Some will see increased premiums as well.

Primary homeowners must pay a $25 surcharge on their policies, while secondary and multifamily homeowners as well as businesses and farms must pony up a $250 surcharge when their policies are renewed, Lemaitre said. In addition, some flood policyholders in high-risk areas can be charged up to 18 percent more on their premiums, he said.

Premiums will gradually rise to bring rates up until they cover what is said to be the full risk of living in a flood zone.

The rate increase, originally set at about 25 percent in 2012 by Congress’s Biggert-Waters Act but revised in 2014 through the Homeowner Flood Insurance Affordability Act, was ordered by lawmakers to recover losses on claims.

“After the first leg was put in place, a lot of those premium increases were too much for some of the policyholders,” Lemaitre said of the 2012 law. “That’s why you have the more recent legislation. We need to make sure the program is sustainable in the long term, but we have to be sensitive to the policyholders.”

He estimates about 20 percent of all flood policyholders will see a rate increase.

“Those are in high-risk areas,” Lemaitre said.

Because the 2014 law lowered premium increases, the surcharge on all policyholders was put in place to make up for slowing the revenue stream to pay FEMA’s debt to the U.S. Treasury.

The government also has subsidized flood insurance for some people. That’s being phased out.

Jimmy Carroll with Carroll Realty on the Isle of Palms said the higher insurance rates will affect property values and sales.

“People buying will be saying, ‘How much is the flood insurance and how much will it increase per year?’ and they are not going to pay as much for a house that is older and below flood elevation,” he said Thursday. “The whole goal of the flood insurance changes is to force those with houses at flood elevations to tear them down and build new ones or raise them up, but how do you raise a historic house?”

To lower insurance costs, homeowners can elevate their homes on stilts or bricks to make them less vulnerable to flooding, but the cost can be daunting, as much $30,000, according to a Washington Post report.

Swails of State Farm in Mount Pleasant said he didn’t fully understand all the ramifications of the law, but he stressed that structures in flood-prone areas should be insured.

“It’s something that everybody needs,” Swails said. “We live on the coast, and that’s the price we pay. The exposure is there, no question about it.”

Lemaitre, with FEMA, echoed those remarks, saying 85 percent of federal disaster declarations involve flooding to some degree.

“It’s important people understand how serious flooding is and that they take action to protection themselves,” he said. “Flooding is one of the most costly disasters we see, and that’s why we encourage folks who don’t think they are affected by flooding to have flood insurance.”

Reach Warren L. Wise at 937-5524 or twitter.com/warrenlancewise.