NC - If you have flood insurance, the price is likely going up. What that means in NC
Starting this month , anyone buying a flood insurance policy will see a shift in prices due to a set of changes the Federal Emergency Management Agency has called Risk Rating 2.0.
“The way that the rates are actually set is long overdue for an overhaul and has not been updated in decades, so Risk Rating 2.0 really brings the whole insurance system into the 21st century with updates that are based on more granular data about an individual property,” Laura Lightbody, director of The Pew Charitable Trust’s flood-prepared communities initiative, told The News & Observer.
FEMA has touted Risk Rating 2.0 as marking a significant shift in how flood insurance premiums are set by accounting for a number of property-specific factors instead of setting prices solely based on the zone where a property sits. The federal agency oversees the National Flood Insurance Program, pricing flood insurance and also deciding which property owners need to purchase it in order to secure a federally backed mortgage.
“Policyholders with lower-value homes that have been paying more than they should will no longer bear the cost for the policyholders with higher-value homes who have been paying less than they should. Risk Rating 2.0 fixes this injustice,” David Maurstad, the National Flood Insurance Program’s senior executive, said on a recent press call.
The NFIP has historically been deeply in debt due to massive losses from storms like Hurricane Katrina and Hurricane Harvey. And losses are likely to mount as climate change continues to exacerbate natural hazards like hurricanes and heavy rainfall.
If you have flood insurance, the price is likely going up. What that means in NC Raleigh News & Observer
Flood insurance is typically not covered by homeowners’ policies.
New policies purchased after Oct. 1 are subject to the changes. Any existing policies renewing on or after April 1, 2022, will be impacted by the changes.
How is FEMA changing its formula?
Flood insurance rates have historically been based on whether a property sat in a specific zone. Rates were largely based on how flood-prone FEMA deemed that zone.
Now, FEMA will consider such factors as the frequency of floods, how far a property is from water and how flooding is caused. The program will also consider information like whether a property is elevated and how much it would cost to rebuild.
“Your policy is now going to be property specific. It’s going to be tailored exactly to the location and the characteristics of your house, and so the prices are going to change to reflect that additional information,” said Miyuki Hino, a UNC-Chapel Hill professor of land use and environmental planning.
Steve Garrett, North Carolina’s National Flood Insurance Program coordinator, said that historically a property on the edge of a flood map would be paying the same rate as one that was much closer to a water source but in the same flood zone. Under Risk Rating 2.0, Garrett said, the pricing will be more “actuarial.”
“It gives a more comprehensive picture of the flood risk of a structure but also individualizes that to that specific location,” Garrett said. Because the new formula considers replacement cost, he added, it better accounts for the actual risk posed by a specific property.
How will this impact what I’m paying for flood insurance?
The answer comes down to your specific property.