A home at the corner of Sixth Street and Central Avenue is being elevated above "base flood elevation" (BFE). Structures that remain below BFE face the steepest flood insurance premium increases.
Flood insurance policy holders in Ocean City will soon see increases in their annual premiums, as well as a new surcharge: $25 for primary residences and $250 for all others, including second homes.
The changes will take effect upon a policy's renewal after April 1 and stem from the Homeowner Flood Insurance Affordability Act (HFIAA), passed by Congress
last spring in response to 2012's Biggert-Waters Flood Insurance Reform Act.
Under the former statute, homes vulnerable to flooding were poised for steep premium hikes through the elimination of subsidies and — in the event of a sale — full-risk rates for new owners, a sum that could have rendered many local properties unsellable and unsustainable. The HFIAA allowed those same new owners to assume a seller's subsidized rate and restores grandfathering for existing homeowners, all while capping at 15 to 18 percent the amount the National Flood Insurance Program (NFIP) can raise insurance rates for any primary residence in any single year.
Owners of second homes and homes deemed substantially damaged or substantially improved have less breathing room, however, according to Tom Heist, president of Thomas H. Heist Insurance Agency of Ocean City. Pursuant to the HFIAA, they face a mandatory 25-percent rate increase, in addition to the $250 surcharge. What's more, Heist warned, the addition of taxes and fees to the equation could lead to "dramatic" increases in overall premiums "in excess of 37 percent."
"It could be a huge number," he said.
As a "Class 6" participant in the NFIP's Community Rating System (CRS) program, which rewards flood mitigation and awareness activities, Ocean City is able to offer its residents a 20-percent discount on their premiums overall. According to city officials, with 16,807 policies in force and a combined collection of $14,507,938 in total premiums last year, that discount translates into $2.9 million in savings for homeowners.
Contributing factors in its Class 6 rating are Ocean City's installation of elevation benchmarks on utility poles throughout the island, its creation of a searchable database of
scanned elevation certificates and its passage in January 2013 of an ordinance requiring homeowners who rebuild or elevate to position their first floor of living space two feet above base flood elevation (BFE+2), the projected high water mark during a 100-year flood.
Although neighboring towns like Avalon, Stone Harbor and Longport
are able to offer their residents a 25-percent discount as Class 5 communities, an "Action Plan" authored last year by the Floodplain Management Plan Committee — and later adopted by City Council — indicated Ocean City's belief that it would "not only regain" Class 5 status, but also "become the highest rated community in the state."
In 2013, the NFIP introduced several new categories of potential point-generating activities, including "Flood Protection Assistance," which rewards municipalities for providing citizens with direction on how to obtain financial assistance for flood mitigation projects. Additionally, Ocean City by last spring had not yet received credit in other categories such as "Flood Protection," which offers points every time a home which has flooded repetitively is replaced or elevated above BFE. According to the Action Plan, 84 such "repetitive loss" properties in Ocean City had been replaced or elevated to become "new, compliant structures," thereby entitling the city to an additional 80 CRS points.
Yet Ocean City stands to potentially gain the most this year — 220 points — from the catch-all category "Outreach Projects." The development of a "Program for Public Information" (PPI) initiative — administered by members of the Floodplain Management Plan Committee, community groups and private citizens from the finance, real estate and insurance industries — will be a contributing factor, as will Ocean City's creation of Flood Response Preparation (FRP) information and materials for both pre- and post-flood events, according to the Department of Community Operations.
As Ocean City fulfills various CRS requirements, it can request a review at any time with a CRS specialist who can, in turn, order a change in Ocean City's class rating. Those changes are processed twice yearly — in May and October — and flood insurance rates would be reduced at the following effective date.
According to Heist, "the future" of affordable flood insurance in coastal communities could largely depend upon participation in the CRS program.
"Ocean City has worked very aggressively to increase their CRS points," he said. "I think all towns are going to have to be just as aggressive. Every 5 percent (discount) adds up to significant dollars saved by taxpayers."
In the interim, homeowners — both secondary and primary — can take some steps to lower their new flood insurance bill.
FEMA guidelines require that homes provide adequate openings of 1 square inch for every 1 square foot of covered space, i.e., the footprint of a home, to allow for better water flow during a flooding event. Replacing the "slider" style air vents popular in many older Ocean City homes with engineered "smart" flood vents is a relatively cost-effective switch, according to Heist, because each 16-by-8-inch engineered vent is approved by FEMA for providing increased coverage of 200 square feet.
Additionally, the HFIAA authorized for the first time an increased deductible of $10,000. Making that change could yield certain homeowners a "pretty significant" reduction in their overall premium, Heist said.
Lastly, policy holders should carefully review their mail. Primary homeowners who fail to respond to FEMA's "Verification of Primary Residence Status" letter — which requires proof of residency, such as a utility bill or a photocopied driver's license — will be charged the $250, non-primary residence surcharge, according to Heist.
Read more: Fact sheet on April 2015 NFIP changes
