How Significant Changes To Flood Insurance Will Have An Impact in 2024
The Risk Management Process for Business
July 24, 2023Everything You Need to Know About Preventing Frozen Pipes
January 26, 2024Rating 2.0
Since the 1970s, rates have been predominantly based on relatively static measurements, emphasizing a property’s elevation within a zone on a Flood Insurance Rate Map (FIRM).
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.
IMPORTANT: Elevation of building, use of smart vents are now only a contributing factor, and not the primary driver of discounts. This is VERY IMPORTANT when discussing construction loans.
Limiting Annual Premium Increases Existing statutory limits on rate increases require that most rates not increase more than 18% per year.
Using Flood Insurance Rate Maps (FIRMs) for Mandatory Purchase and Floodplain Management
FEMA is continuing to offer premium discounts for pre-FIRM subsidized and newly mapped properties.
Policyholders are still able to transfer their discount to a new owner by assigning their flood insurance policy when their property changes ownership.
Distance to Flooding is more important than elevation
The ground elevation is increased in importance.
A newly lifted building on -1 elevation is STILL expensive.
Replacement cost and property values are factored in.
Rating 2.0: What hasn’t changed?
- Premium Increases- Limiting Annual Premium Increases -Existing statutory limits on rate increases require that most rates not increase more than 18% per year.
- Flood Insurance Rate Maps Using Flood Insurance Rate Maps (FIRMs) for Mandatory Purchase and Floodplain Management FEMA is continuing to offer premium discounts for pre-FIRM subsidized and newly mapped properties.
Risk Rating 2.0, a transformative initiative by FEMA, signifies a departure from the conventional and a leap into a more sophisticated and dynamic approach to flood insurance rating.
The problem: Meet Shawn McDrew
- Hired the right architect with real Jersey Shore knowledge.
- Lifted the house almost 12 ft from the existing structure.
- Met and exceeded every FEMA guideline.
- Was expecting a flood premium under $1,000 The Result:
- $5,000 premium. Closing delayed.
Some People Benefit: Meet the Gelos Family
- House not lifted
- Prior premium was $3200
- Quoted under Ratings 2.0 The Result:
- $1,100 new rate
Rate Explanation Guide
- Distance to Flooding is more important than elevation The ground elevation is increased in importance.
- A newly lifted building on -1 elevation is STILL expensive.
- Replacement cost and property values are factored in.
Summary Of Impact
- Raising Houses has less impact overall.
- Quote yourselves – Don’t wait for the customer.
- Assuming a prior policy is more important than ever.
- Start to assemble a library of prior quotes. Know your neighborhoods.
- Similar impact for Flood Builders Risk policies.
- A relationship with an independent agent is critically important.