HFIAA Surcharge

The Homeowner Flood Insurance Affordability Act (HFIAA, commonly pronounced "huh-fi-ya") introduced significant changes to the National Flood Insurance Program (NFIP), directly affecting policyholders based on their primary residence status. As an insurance agent, it's crucial to understand these modifications to effectively advise clients.

Primary Residence

Under HFIAA, a primary residence is defined as a building where the insured or their spouse resides for more than 50% of the 365 days following the policy's effective date. This determination is vital, as it influences premium rates and surcharges. Notably, FEMA has updated its guidance to allow a policyholder and their spouse to each have one primary residence, accommodating situations where spouses live separately for over half the year.

Premium Surcharges

HFIAA mandates an annual premium surcharge based on the property's occupancy status:

• Primary Residences: $25 surcharge.
• Non-Primary Residences and Non-Residential Properties: $250 surcharge.

This surcharge is included in the policy's annual premium. To qualify for the lower surcharge, policyholders must verify their primary residence status by providing documentation such as a driver's license, vehicle registration, voter registration, or a signed and dated statement confirming their residency status.

Rate Increases

HFIAA aims to balance premium adjustments with affordability. For primary residences, annual premium increases are generally capped at 18% per policy, while rate classes have an average increase limit of 15%. However, certain subsidized policyholders may experience mandatory increases to gradually align premiums with full-risk rates.

Important Details

As an insurance professional, it's essential to:

1. Verify Primary Residence Status: Ensure clients provide the necessary documentation to confirm their primary residence status, securing the appropriate surcharge and preventing potential policy issues.
2. Communicate Premium Changes: Inform policyholders about potential premium increases and surcharges resulting from HFIAA provisions, helping them understand and prepare for changes in their insurance costs.
3. Stay Informed: Keep abreast of NFIP updates and HFIAA implementations to provide accurate and current information to clients, ensuring compliance and optimal policy management.

By understanding and communicating these HFIAA-induced changes, you can better serve your clients, helping them navigate the complexities of flood insurance policies and maintain appropriate coverage for their properties.

This page contains information about the NFIP. Find more NFIP Resources.