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The cost of flood insurance is changing. FEMA says it will be more equitable.
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The cost of flood insurance is changing. FEMA says it will be more equitable.

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Some Quad-Cities homeowners may pay more for flood insurance under new flood pricing and insurance rules enacted by the Federal Emergency Management Agency, while others will see a decrease.

FEMA recently unveiled a new risk rating system it says will bring more equitable pricing to flood insurance.

Under the new rating system, the cost of flood insurance will be primarily based on the cost of replacing a home and each property's unique flood risk.

Previously, flood insurance premiums were based largely on the property's elevation and outdated flood maps that didn't keep up with the realities of climate change, said Nick VinZant, senior research analyst with QuoteWizard by LendingTree.

"It really left a broken system, because they were seeing so much more flooding than they were able to kind of deal," VinZant said. "They were paying out far more than they were taking in."

Nationwide, the National Flood Insurance Program provides about $1.3 trillion in coverage for more than 5 million policyholders. Nearly 80% of whom will pay $10 to $100 more a month, according to FEMA estimates.

Around 1.2 million policyholders will immediately see a rate decrease of between $10 and $100 a month.

The new rating system incorporates more flood risk variables, including flood frequency, river overflow, storm surge, coastal erosion and heavy rainfall, distance to a water source and property characteristics such as elevation and the cost to rebuild.

"What that means in Iowa is 63% of policyholders they are going to see an increase in their flood insurance premiums" VinZant said, based on FEMA estimates.

That increase, though, will be relatively small. In most cases, it will mean an increase of $10 to $20 per month, according to FEMA estimates. About 6.4% will see an increase of more than $20 per month.

"But, for the people who are seeing a decrease — that 37% — the decrease could be substantial," VinZant said. "As much as $100 or more a month in some cases."

For the most part, property owners in lower-value homes and neighborhoods will be paying less, while property owners in higher-value homes and neighborhoods will be paying more, according to FEMA.

The new rating methodology took effect Friday, Oct. 1 for all new policies, and existing policyholders eligible for renewal will be able to take advantage of immediate decreases in their premiums under the new rating system.

All remaining policies renewing on or after April 1, 2022, will be subject to the new rating methodology.

FEMA says the new rules make people pay for the real risk they are insuring.

VinZant said 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.

"It's rebalancing flood insurance," he said. "Because, in the past, everybody kind of paid for everybody. Now, it's going to be much more focused on the individual risk that a homeowner is facing."

Because new rating system considers rebuilding costs, FEMA can equitably distribute premiums across all policyholders based on home value and a property’s unique flood risk, he said.

"Right now, about 2% of the policies account for about 20% of the losses," said Bill Cappucio, National Flood Insurance Program specialist with the Iowa Department of Natural Resources.

In the greater Quad-Cities area, based on ZIP code, FEMA estimates roughly half of NFIP policies will see a decrease in their premium.

Cappucio, though, noted the new rating system is much more complicated and less straight forward, making it difficult to say definitively how the rule changes will impact policy holders in the region.

"I haven’t seen enough examples for me to render an opinion one way or the other," Cappucio said of FEMA's claims of more equitable pricing to flood insurance. "It could be the greatest thing in the world. It could be the worst thing in the world. It could be the same. I just don’t know."

In Davenport, city officials estimate approximately 3,000 structures are located in a floodplain near a creek or river. Of those properties, an estimated 500 are insured.

Property owners living in the floodplain generally have the option to carry or not carry flood insurance, unless required by their mortgage provider or if they have previously filed a claim.

"We only know those required to carry flood insurance due to repetitive loss," said Robbin Dunn, communications and preparedness manager for the city of Davenport Public Works Administration.

Davenport policyholders, though, will still receive a discount thanks to the city's participation in FEMA's National Flood Insurance Premium Community Rating System, said Bryan Christopherson, certified floodplain manager and licensed insurance agent with FloodProofing.com based in eastern Iowa.

The system provides discounts to policyholders based on community efforts to reduce flood damage to insurable property. That can mean an average savings of $250-$300 on premiums, according to the city.

A city-hired consulting firm is in the process of refining strategies for protecting Davenport's riverfront from increased flooding. The Davenport City Council is expected to receive a full report and recommendations, including proposed funding and implementation strategies, next month.

"Folks should highly consider flood insurance that is right for them," Christopherson said. "I also encourage people to read their policies. Make sure they have covered what they need covered."

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