MAJOR IMPROVEMENTS COMING TO THE NATIONAL FLOOD INSURANCE PROGRAM
On Oct. 1, 2021 FEMA will begin implementing a new pricing methodology called Risk Rating 2.0: Equity in Action. These changes will apply to new policies. Most existing policies will not be affected until after April 1, 2022.
Where Can I Find More Information About FEMA’s Risk Rating 2.0: Equity in Action?
As FEMA implements the new pricing system, some owners and buyers may have questions about flood insurance rate changes. Real estate agents and brokers are an information source, not flood or insurance experts. You can provide the facts that every home in America has some flood risk, and a flood insurance rate quote from a licensed insurance professional can help your clients make better informed decisions. You can also be ready with contact information for a few NFIP and private market insurance agents, licensed surveyors/engineers, and other flood risk professionals (e.g., your local government floodplain manager) who can offer risk assessment and mitigation resources and answer property-specific questions.
NAR has developed the following comprehensive packet of educational information for NAR members to talk with customers about Risk Rating 2.0:
FEMA-NAR Flyer for Homeowners
NAR Frequently Asked Questions (FAQs)
NAR Member Legal Guidance
NAR-FEMA Toolkit: Disaster Preparedness
Video: NAR-FEMA Townhall
Video: Flood Insurance & Disclosures: What You Need to Know Now
To learn more about Risk Rating 2.0: Equity in Action, FEMA has a dedicated webpage with comprehensive consumer resources(link is external).
What’s Changing? Since the 1970s, National Flood Insurance Program rates have relied predominantly on a property’s location with a zone on a relatively static Flood Insurance Rate Map. With the new methodology, FEMA now has access to modern insurance technologies, catastrophic models and data sets so it no longer requires zones or elevation certificates. The new methodology rates each individual home according to property specific rating factors, such as its unique elevation, distance to water and cost to rebuild.
Why? Currently, policyholders with lower-value homes are paying more than they should and policyholders with higher value homes are paying less than they should. These lower-value homes have some of the highest rates in the program. Under the new methodology, they will see an immediate decrease in insurance costs because it accounts for more risk factors and rates each home individually.
What Does this Mean for my NFIP Rate – Will it Go Up or Down? Because each home is rated individually under the new system, only a licensed insurance agent can tell you that. Please contact your agent today to prepare a quote for you or view FEMA’s Risk Rating 2.0 at www.fema.gov/flood-insurance/risk-rating.
What’s Not Changing Under Risk Rating 2.0? Rate increases will not exceed 18% per year; Grandfathered rates including for newly mapped and pre-FIRM subsidized homes will continue; Policyholders will still be able to transfer discounts to a new owner by assigning their flood insurance policy; and Floodplain Mgmt. requirements will continue to be enforced by communities and lenders as usual.
Source: FEMA & National Association of Realtors®