FEMA Risk Rate 2.0 - What you need to know

FEMA Risk Rate 2.0

FEMA is updating the Nation Flood Insurance Program's (NFIP) risk rating methodology through the implementation of a new pricing methodology called Risk Rating 2.0. 

Why the update?

With Risk Rating 2.0, 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 and heavy rainfall—and distance to a water source along with property characteristics such as elevation and the cost to rebuild.

These changes affect New Orleans, the Gulf Coast, and everyone country-wide.  

Currently, policyholders with lower-valued homes are paying more than their share of the risk while policyholders with higher-valued homes are paying less than their share of the risk. Because Risk Rating 2.0 considers rebuilding costs, FEMA can equitably distribute premiums across all policyholders based on home value and a property’s unique flood risk.

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.

All remaining policies renewing on or after April 1, 2022, will be subject to the new rating methodology.  

What does this mean for me?

If you are staying in your home, your premium may increase.  The annual increases are capped at 18%.

If you are selling, having an existing policy will attract buyers as they can assume the policy and take advantage of the incremental annual increases.

If you are buying, it may be in your best interest to assume the seller's flood insurance policy. If that is not an option, I can work with you to research flood policy quotes.

I am more than happy to discuss this further with you and you are welcome to contact my trusted, local insurance agent, Alyssa Bourgeois with Eustis Insurance, for all questions and concerns.