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FEMA's New Flood Insurance Premiums

In Spring 2022, the Federal Emergency Management Agency (FEMA) officially revised its flood risk evaluations, triggering a rise in flood insurance costs across the country. FEMA’s new flood insurance premiums will be based on their Risk Rating 2.0 and will take five main factors into account when issuing insurance prices: your property’s proximity to a water source, foundation type, historical flood frequency, ground floor elevation, and rebuilding costs. This is aimed to make fairer, more equitable rates based on the projected risk of each property.

While the majority of policyholders will see an increase in their rates, some people will see their rates decrease and some may stay the same. The entirety of FEMA’s new flood insurance premiums won’t go into effect all at once, however, as most rate increases are capped at 18% each year. This means that most policyholders will see their annual costs rising over the span of the next few years. FEMA predicts that it could take over a decade of annual premium increases until the majority of insured properties reach their final risk rate.

Every year at renewal, FEMA projects that 66% of current policyholders will see, on average, an increase of $0-120 per year, while 23% of policyholders will see immediate decreases per year. A smaller percentage of policyholders under the new Risk Rating 2.0 will see major hikes in their rates, possibly paying $240 or more per year.

This reevaluation of risk ratings stems from insurance providers widely underpricing properties which has resulted in a $96B payout while only collecting $60B in premiums due to the increase in properties in areas at risk of flooding caused by worsening weather patterns and rising sea levels. Unfortunately, this results in flood insurance policyholders in higher-risk areas having to take the hit by paying more to protect their properties.

It’s important to secure your flood insurance policy before bad weather hits your area, for there is a 30-day waiting period before a National Flood Insurance Program (NFIP) policy goes into effect or as short as a 10-day wait from a private provider. For new home purchases, this waiting period is waived. There are many options for who can provide flood insurance to your home or business. You can call your current insurance agent to add flood insurance to your property, or get help finding an insurance provider through FEMA’s online resource.

Thank you to our friends at Goosehead Insurance – The Sacchieri Agency who helped us provide this resource. If you’re looking for flood insurance, they can shop both NFIP and private flood insurance carriers to provide you the best option. Get a free quote here!