The recent changes to the Federal Emergency Management Agency’s (FEMA) Risk Rating 2.0 methodology for calculating flood insurance have caused a stir among homeowners and insurance agents alike. The new system, which is based on a multitude of factors, including rainfall levels, elevation, distance from water, and rebuilding costs, is set to result in higher premiums for thousands of property owners, especially those in low-elevation coastal areas. Recently released data from FEMA provides a clearer picture of the extent of the impact, revealing significant price increases and decreases by county and ZIP code.  Keep reading to find out more.

The New Risk Rating 2.0 Methodology

Recent data released by FEMA, which shows price increases and decreases by county and ZIP codes, confirms that flood insurance prices will rise dramatically in some parts of Florida reaching a 342% increase in flood insurance rates on average, according to the Miami Herald’s analysis of the data.

The data shows that most ZIP codes across the Southeastern U.S. will see some increase in premiums. For example, in Houma, Louisiana, the average premium will jump from $982 per year to $3,511. Even non-coastal regions will be affected, with Albany, Kentucky’s ZIP code 42602 seeing prices soar from $741 to $4,597 on average.

However, some areas will see decreases under RR 2.0, which relies less on FEMA’s much-criticized flood maps and more on other factors, including rainfall levels, elevation, distance from water, and rebuilding costs. For example, more than 80% of policies in one St. Petersburg ZIP code will see a decrease in premiums.

Existing property owners will not feel the full impact of the price increase all at once. Federal law limits rate increases to no more than 18% annually on renewals. However, for new policies, the full impact of the rate increase will be immediately apparent. FEMA has required new policies to be rated under RR 2.0 for the past year.

Insurance agents have already anticipated the magnitude of the changes. One policyholder in a flood zone in Palmetto Bay, Florida, will see their annual premium increase from just over $1,000 to almost $5,000, according to Clayton Fischer, an agent with Blue Marlin Insurance in Coral Gables. However, some private carriers offer more competitive rates than the NFIP RR2.0 policies, Fischer added.

Furthermore, some prospective home buyers may not be aware of the soaring premiums. If the seller does not explain the new rating system, which grandfathers in existing owners, buyers could assume their rates will remain the same. Florida homeowners with Citizens Property Insurance Corp will also see significantly higher premiums this year, as the Florida Legislature mandated all Citizens policyholders to buy flood insurance, regardless of the property’s locale.

In light of these changes to flood insurance rates under Risk Rating 2.0, it’s crucial for property owners to review their policies and ensure they have adequate coverage in place. At Dunham Insurance, we are committed to helping our clients navigate these changes and find the right policies for their unique needs. Our team of experienced agents can provide guidance on the types of coverage available and help property owners make informed decisions to protect their investments. Contact us today to learn more about flood insurance options and how we can assist you in preparing for the future.