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July 15, 2014

State fights back against higher flood insurance rates

The state is poised to limit how much flood insurance homeowners are required to carry in hopes of blunting costly increases brought on by changes in the federal program.

A bill passed by the Massachusetts House and Senate pegs the level of flood insurance that must be purchased to the balance of a homeowner’s mortgage, rather than the full replacement value of a property. It prohibits mortgage lenders from requiring deductibles of less than $5,000 or requiring coverage for a home’s contents.

Lawmakers representing coastal districts say changes in federal rules four years ago are forcing whopping increases in flood insurance premiums on their constituents. State lawmakers don’t have authority over the federal flood insurance program but do have sway over the banking and insurance industries. Their bill awaits Gov. Deval Patrick’s signature.

“Without help, homeowners throughout the commonwealth will be at risk of losing their homes, and we must not let that happen,” said state Attorney General Martha Coakley, who filed the legislation with Democratic House Speaker Robert DeLeo.

Under legislation passed by Congress in 2012, the Federal Emergency Management Agency has been redrawing the nation’s flood zone boundaries, many of which haven’t been updated since the 1970s. In addition, the agency phased out decades-old insurance subsidies for those with property in areas at high risk of flooding.

The changes have driven up insurance rates for property owners who are already covered and have forced others to get insurance for the first time, even if they’ve never been flooded.

Amid the backlash, Congress in March rolled back a provision of the law that eliminated subsidies for hundreds of thousands of properties that were built to code but later found to be at greater flood risk. While preserving those subsidies, Congress also capped flood insurance premium increases at 18 percent a year.

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