There’s something new for rating flood insurance premiums for your home and property, but what will this mean for you?
The new methodology for rating insurance premiums allows FEMA to equitably distribute premiums across all policyholders based on the value of their home and the unique flood risk of their property. Currently, many policyholders with lower-value homes are paying more than they should, and policyholders with higher-value homes are paying less than they should. So the new rating system could prove to be a good thing for you, or a bad thing depending on the value of your home.
To provide more equity, FEMA now has the capability and tools to address rating disparities by incorporating more flood risk variables. These include flood frequency, multiple flood types (river overflow, storm surge, coastal erosion, heavy rainfall), distance to a water source, and property characteristics such as elevation and the cost to rebuild.
In developing the new rates, FEMA coordinated with subject matter experts from the U.S. Army Corps of Engineers, U.S. Geological Survey, and the National Oceanic and Atmospheric Administration along with experts from across the insurance industry and actuarial science to ensure alignment with federal regulations, systems, guidance, and policies.
In Phase I: New policies beginning Oct. 1, 2021, will be subject to the new rating methodology. Also beginning Oct. 1, existing policyholders eligible for renewal will be able to take advantage of immediate decreases in their premiums.
In Phase II: All remaining policies renewing on or after April 1, 2022, will be subject to the new rating methodology.
On a personal note, this writer had 5 feet of water in my home due to the storm surge from Superstorm Sandy. The house has always been located in a flood zone since we purchased it in 1989. Pre-Sandy the insurance premium was $874 but has since climbed to $4,419. (It is a very modest home on the lower end scale, but we have yet to see any relief in premium so far.)
We haven’t had the grip of a financial institution’s requirement to have flood insurance since January of 2012 but decided to keep the flood insurance in place anyway. We were some of the lucky ones because we were paid fairly in order to rebuild, and we have an even better home now that meets current building codes and safety requirements.
If you are having second thoughts about keeping a flood policy in place, I would urge you to keep it. Your home is likely your greatest asset. And who knows how climate change will impact flood losses for everyone’s properties down the road? A flood policy should be part of your preparedness and will bring peace of mind.
Walks through different neighborhoods devastated by the likes of Sandy revealed to the naked eye who had proper flood insurance and who didn’t. A lot of homes even went up for auction. A lot still are now considered “zombie” homes almost 10 years later. I have at least 4 of them on my block.
So please take ACTION by having flood insurance for your home, rather than having it risk AUCTION because of a flood event. The only difference is “U” – YOU!!