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Featured Insurance Blog

NFIP Flood Insurance Changes

Flood Risk Rating 2.0

925 Partners Insurance

Austin Williams, VP Personal Division

The National Flood program will start implementing its new Flood Risk Rating 2.0 starting on 10/01/2021 for new policies and 04/01/2022 or later as each policy comes up for renewal. While there are quite a few changes with this new rating system I have highlighted the biggest changes below:

  • How the rates are derived. FEMA will use both FEMA sourced data and other outside sources as well as the cost to rebuild, new rating variables, and flood frequency to calculate rates under Risk Rating 2.0. Each property has their own individual rate based on their flood risk. Prior to the change the address, value of home, or flood frequency were not used to calculate rates. 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‚Äôs unique flood risk.
  • Another big change is New Business with effective dates after 10/1/2021 will not require an Elevation Certificate, but if one is entered and more beneficial, it will be used. If the Elevation Certificate is not as beneficial as the information determined by FEMA, the policyholder will not be penalized, it will simply not be used. Prior to this change if the property was in a high-risk flood zone (A, AE, VE, V) then an elevation certificate was required to get flood coverage.
  • Rates will be calculated per thousand, opposed to per hundred previously, this means coverages will need to be in thousands.
  • No longer including basements, enclosures, and crawlspaces in the number of floors. Prior to this change a crawlspace was counted as a floor so rating was from the ground level. With this change, homes on a crawlspace or elevated enclosure could see premium reductions as they will now be rating from the next higher floor/actual first floor.
  • Prior claims variable applied at renewal of a policy, AFTER the first loss reported under Risk Rating 2.0.

While there are quite a few changes, some things are remaining unchanged:

  • Existing statutory limits on annual premium rate increases require that most rates not increase more than 18% per year.
  • The current flood maps will still be used in determining flood zone and if flood insurance will be mandatory for purchase with a mortgage.
  • FEMA will continue to offer premium discounts for pre-FIRM (homes built prior to the area being mapped for flood zones) subsidized and newly mapped properties.
  • Policyholders will still be able to transfer their discount to a new owner by assigning their flood insurance policy when their property changes ownership.
  • Discounts to policyholders in communities who participate in the Community Rating System will continue. Communities will continue to earn National Flood Insurance Program rate discounts of 5% – 45% based on the Community Rating System classification. These discounts are earned by the communities based on initiatives and being proactive in their flood plain management and vary by community. However, since Risk Rating 2.0 does not use flood zones to determine flood risk, the discount will be uniformly applied to all policies throughout the participating community, regardless of whether the structure is inside or outside of the Special Flood Hazard Area.

Quite a few home insurance carriers and other stand-alone private carriers offer flood insurance and those programs remained unchanged by the National Flood Program changes mentioned above. If you have further questions on how these changes will impact your home or business, please call/email us and talk to one of our flood insurance experts. We can be reached at 855-925-1200 or admin@925partners.com

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