South Dakota Landlord Worried by Slow Flood Insurance Relief

Despite the passage of a federal policy to ease spikes in flood insurance rates, implementation lag time is leaving at least one South Dakotan in a lurch.

Two of Cory Gollnick’s seven rental properties in Aberdeen have or will see flood insurance rate increases this year through the National Flood Insurance Policy. The field engineer is considering his options and may drop one policy. He says he has a lot of unanswered questions for the Federal Emergency Management Agency, which oversees the program.

“My renewal this year is going to be extremely high unless FEMA gets this new reform implemented by then,” Gollnick said.

A 2012 federal policy sought to make the cost of national flood insurance rates reflect actual risk. That caused rates to spike starting last year. The rate increases were driven by a need to relieve the $24 billion debt of the NFIP, which offers subsidized flood insurance to 1.1 million Americans, including over 1,600 policies in South Dakota.

President Barack Obama recently signed a new law to ease the rate transition. The new policy will be applied retroactively, but it will take time for FEMA to catch up.

“The best advice would be to not let the policy lapse, but keep in touch with the (insurance) agent,” said Jerry DeFelice a spokesman with FEMA.

Gollnick purchased one property in the flood plain this past Monday. When he learned that a new policy could cost over $2,000 a year for a $72,000 house, he tried to back out on the sale. The policy for the property used to cost $789.

But Gollnick was able to get a grandfathered-in rate on the 1930s house and will pay $931 this year.

The legislation says FEMA must strive to minimize the number of policies with annual premiums that exceed one percent of the total property value coverage, or what would be $720 a year in Gollnick’s case.

Gollnick’s other property is due for renewal in June.

“That’s the one that’s going to hurt me,” he said. “I’m looking at restructuring my loans and removing that property from my portfolio.”

If he can pay off that $38,000 property with cash or equity, he won’t be required to keep his flood insurance policy. People with mortgages through federally insured banks must get flood insurance if the property is in the flood zone.

Gollnick wonders what will happen if he does overpay by the new law’s standards.

“I don’t know. Are they going to pay me back?” he asked.

FEMA changes course on its flood insurance policy according to rules laid out by Congress. Spokesman DeFelice said they have received some preliminary guidance on how to implement the rollbacks and refunds in the newest law. He said FEMA is working on a version of the document that would be available to the public very soon.