Flood Insurance Prices are Skyrocketing

A new law meant to stabilize the federal government's money-losing flood-insurance program is starting to send rates sky high, prompting a growing backlash in coastal areas. 

The Biggert-Waters law, enacted in 2012 before superstorm Sandy hit the Eastern Seaboard, requires that government insurance premiums for the 5.6 million property owners in flood-prone regions be set at a level that better reflects the full risk of flooding. It was prompted by cumulative losses that had ballooned to $24 billion for the National Flood Insurance Program.

Insurance agent Bill Bubrig, in front of his home in 

Plaquemines Parish, La., could see his flood insurance

increase from $633 to $28,000 a year.

The changes mean some owners must retrofit their homes or businesses—by raising buildings higher above the ground and taking other measures—to better guard against flooding, or pay rates that could surge to $10,000 and higher a year. 

Property owners along the Gulf Coast and Eastern Seaboard, used to annual premiums of about $1,000, are starting to feel the impact. 

Vacation homes are subject to new insurance rates starting this year, while primary residences already subject to flood insurance will get new rates in phases.

Hurricane Sandy damage on the bay side of
Seaside, N.J. on Tuesday, Oct. 30, 2012.

The government also is redrawing flood-zone maps that will classify more properties as flood risks.

Bill Bubrig, a 47-year-old insurance agent in Plaquemines Parish, La., is at the leading edge of the sticker shock. 

"This will be much worse than Hurricane Katrina as far as the devastation that it's going to cause the lower end of our parish," he said. 

Mr. Bubrig estimated that flood-insurance premiums on his home will increase from $633 to $28,000 a year, with a big chunk of the increase hitting as early as 2014.

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