Flood insurance too expensive? Proposal aims to control costs for NJ users
🌊 Many at-risk NJ homeowners have dropped flood coverage due to cost
🌊 A new proposal would cut maximum premium increases in half
🌊 The federal bill also aims to reform the claims process, based on Sandy lessons
As a growing number of New Jersey residents opt out of insurance coverage for flooding of their home, federal lawmakers from the Garden State unveil a plan to overhaul the way flood insurance is handled nationwide, so that no more policyholders are driven away by increasing costs.
"Insurance is about spreading the risk across the greatest pool possible," said U.S. Sen. Robert Menendez, D-N.J., during a press conference in Sea Bright. "The lower the pool, the higher the premiums. The broader the pool, the lesser the premiums."
Menendez is one of the many names behind the just-announced National Flood Insurance Program Reauthorization Act of 2023, which would implement a series of sweeping reforms through a five-year renewal of the NFIP.
Much of the overhaul is aimed at reining in costs for homeowners. Under the measure, premium hikes for flood coverage would be capped at 9% annually. Currently, annual increases are capped at 18%.
"We also have a 90-day grace period for policyholders who can't pay their premium initially," said U.S. Rep. Frank Pallone, D-N.J. 6th District.
According to Pallone, thousands of New Jersey residents are among the 100,000 policyholders that the NFIP has lost over the past year. The program is estimated to lose hundreds of thousands more over the next few years.
Legislative leaders blame the decline on FEMA's latest flood-risk methodology, which rates each home individually rather than by zone.
"FEMA's Risk Rating 2.0 is lowering costs for some, but it's causing thousands of households to drop coverage altogether due to rate shocks," Pallone said.
The new measure has bipartisan support in both the House and the Senate.
The act would also reform the flood insurance claims process based on lessons learned from Superstorm Sandy and other disasters.
"Reform of the National Flood Insurance Program is long overdue," said Paul Jeffrey, of New Jersey Organizing Project, an advocacy group created in the wake of Sandy. "The struggles we faced in obtaining insurance and FEMA payouts were nothing short of daunting. Beyond the financial impact, the emotional and health impacts were devastating."
Beyond user-related measures, the proposed federal law addresses initiatives to reduce flood damage nationwide. The legislation would boost funding for mitigation grants, and modernize mapping to identify and reduce flood risks.