Nuts & Bolts March 25, 2022

Flood Ins. Risk Rating 2.0 in Effect on April 1

Homeowners who renew NFIP flood insurance after April 1 face updated guidelines with new home-by-home prices. But some subsidies and discounts remain in effect.

WASHINGTON – The National Flood Insurance Program (NFIP) introduced “Risk Rating 2.0” about two years ago. Under the previous program, FEMA identified flood zones and charged each homeowner in that flood zone the same amount. Risking Rating 2.0 works more like private insurance, where a flood zone may be one factor in computing a yearly premium, but each home receives an individualized quote that may differ from a neighbor’s quote.

On Oct. 1, 2021, Risk Rating 2.0 went into effect for some people, including new homebuyers who applied for coverage.

On April 1, 2022, Risk Rating 2.0 will apply to current homeowners with coverage when it’s time to renew their policy. Those who renew in April will see a new quote almost immediately; those who renew in March won’t see an updated quote for almost a year.

Flood insurance features unchanged under 2.0

  • Yearly increases: Existing statutory limits mean most rates cannot increase more than 18% per year.
  • Flood maps: While flood maps won’t dictate how much homeowners pay by zone, they’ll be used as part of an individual’s personal calculation. They’ll also be the basis for floodplain building requirements and “mandatory purchase requirements” often required by mortgage lenders.
  • Premium discounts: Pre-FIRM subsidized and newly mapped properties will still qualify.
  • Policy transfers: When a property changes ownership, the seller – if willing – can still transfer their policy to the buyer.
  • Discounts: Homeowners in communities that participate in NFIP programs for mitigating flood damage will still receive premium discounts. The amount – between 5% and 45% – is based on the Community Rating System classification. If a community earns a discount percentage, FEMA says it will be applied evenly to all homeowners within that community whether they live in a Special Flood Hazard area or not.

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