Did you know that Texas has the highest potential for floods in any region of the United States? In fact, Texas is so prone to floods that one of the nicknames for Central Texas is “flash flood alley.”
As a result, having good flood insurance is essential for anyone who wants to be a homeowner there.
So is staying on top of the changes to flood insurance, such as the newly updated FEMA risk rating 2.0. As this is the first update in around fifty years, many people have been left concerned that their flood insurance will be affected by this.
If you’re one of the people left wondering, then you’ve come to the right place. Read on and we can tell you exactly how this will affect your flood insurance.
What Is the FEMA Risk Rating 2.0?
Since the 1970s, the risk rates have been based on relatively unchanging factors, mainly focusing on the elevation of a property on a flood map.
This original method of pricing doesn’t work well, because floods are based on many factors. The invention of FEMA risk rating 2.0 works to include these so that rates are not only fair but more accurate, they say.
Some of the new factors FEMA is considering in their risk rating are flood frequency, the different types of floods an area experiences, and proximity to a water source.
In developing the new risk rating, FEMA consulted with experts in all areas to ensure the new rates comply with guidelines, regulations, and policies.
How Is Flood Insurance Being Affected?
Perhaps most importantly, you can expect your flood insurance cost to change. FEMA Risk Rating 2.0 is aiming to make sure that premiums for flood insurance are set based on the property itself. This is in order to ensure that no one is paying more than they’re supposed to.
For some people, this means a decrease in rates as their properties will be assessed to be lower-risk. In fact, many people can expect to see an immediate (if small) drop in their rates when this is implemented.
If your home is determined to be at higher risk, then your premiums will likely increase. Unfortunately, most people can expect to see an increase in their insurance anywhere between ten and one hundred dollars.
Is Flood Insurance Required Under the New Changes?
Like before, the NIFP will only require flood insurance if you are determined to live in a high-risk area or if you have a mortgage in a high-risk area.
Even if it’s not required by law, having flood insurance is a good idea. The NIFP provides flood insurance to 23,000 different places partnered with over 50,000 companies.
In addition, the coverage from flood insurance is excellent- there are very few things that flood insurance won’t cover.
In an area known for the number of floods Texas is, making sure you have the proper coverage is a smart move.
This is even more important to consider because homeowners’ insurance costs do not factor in flooding or even basic coverage from flood-sustained damage.
What Is Staying the Same?
Fortunately, several things that impact flood insurance costs are staying the same, in order to comply with statutory requirements. Under FEMA Risk Rating 2.0, you can still expect to see the following:
Before FEMA Risk Rating 2.0 went into place, there were existing caps on how much your premiums could increase per year – no more than 18% at a time.
Even as rates change to be more equitable, this will not. However, this cap does not apply to second homes, investment properties, or commercial buildings.
Using Flood Insurance Rate Maps (FIRM) is essential to communities. It helps inform floodplain management building requirements as well as the mandatory purchase requirement.
Flood map data will continue to inform catastrophe models that are then used to develop new rates under FEMA Risk Rating 2.0.
FEMA is maintaining certain features in order to streamline the change into the updated risk rating.
This means specifically that premium discounts to pre-FIRM and newly mapped properties will continue to be offered. Policyholders are still able to transfer this discount to a new owner by assigning their flood insurance policy when the other buys the property.
In addition, if you are in a community that is a part of the Community Rating System, you will continue to receive a discount.
Is FEMA Risk Rating 2.0 a Good Thing?
Overall, FEMA’s flood insurance cost changing thanks to the risk rating is a controversial thing. Some people know and are for it, more are vehemently against it, and some have no idea what changes to expect.
However, the update to flood insurance has been sorely needed. FEMA Risk Rating 2.0 was supposed to be implemented in 2019 but faced enough backlash that it took until 2021 to be figured out.
Having fairer and more accurate flood insurance costs will benefit you in the long run. The damage that a flood can cause is devastating, and the criteria set forth in 1968 are no longer enough to cover the costs of that damage.
Get a Quote Today
Now that you’ve learned how FEMA’s risk rating changes will affect flood insurance, you’re prepared to take the plunge. Start the process of getting your own homeowner’s insurance or flood insurance today.
If you’re not sure where to start, it’s best to get a quote from a reputable company like Kicker Insures Me Agency. We can compare your policies with those of other companies to ensure you’re getting the best insurance coverage for your needs.
Contact us here to get started with the quote process!