Flood Insurance is Changing Things you should know.

[Robert Murphy]

NFIP 2.0 - What’s Changing with National Flood Insurance and Why You Should Care.

It’s been a long time coming, but reform to the National Flood Insurance Program (NFIP) is on the way.

Risk Rating 2.0 (that’s how we Flood Nerd-types refer to the reform) isn’t a complete government policy re-boot and it’s going to change the flood insurance market. How the change affects homeowners, business owners, and condo associations will vary depending on your property location and your flood policy.

What’s Changing?

There are major changes and small changes coming with FEMA 2.0. Here's a rundown on what I think are the most important changes.

1) One of the biggest changes to the NFIP will be how they rate policies. For too many years they overcharged half of their customers and undercharged the other half. It seemed as if no one really paid the right amount. The NFIP has relied solely on maps and elevation certificates, however, the new methodology places homes in market “baskets”. The baskets will contain structures with similar property and policy coverage characteristics for that area. Rating will begin to resemble how risk is assessed for other types of insurance. 

2) FEMA enters the technology age. The private flood insurance market has used high-tech to better understand the risk of flooding. The NFIP will now employ this same technology. NFIP was relying on outdated maps for rates in the past some of the maps were more then 50 years old.  

3) Homeowners in Washington, Oregon, California, Alaska, and Hawaii pay attention! FEMA 2.0 will factor in the risk of a tsunami into the new coastal rates. FEMA 2.0 will exclude tsunami risk from the rates for a property that is 20 miles inland from the Pacific Ocean or in California ZIP codes 92647, 92648, and 92649. They will also exclude tsunami risk in the Atlantic Ocean.

4) VE flood zones will be added to the Great Lakes properties. They can be impacted by seiche flooding. This is a standing wall of water or a huge wave that is caused by strong winds and a rapid change in atmospheric pressure.

5) Replacement Cost Value. One of the advantages of private flood insurance is the ability to insure for the replacement cost. FEMA 2.0 will use a replacement cost value to calculate premiums, but they will still limit you to $250,000 in coverage.

6) FEMA 2.0 will give you credit for individual property mitigation. Elevating the building on posts, piles, or piers can save you money. Move the building machinery and equipment up off the lowest floor and you'll get a break too. Flood openings, when done in accordance with FEMA rules will save you money but they must be certified by FEMA to earn mitigation credits.

7) Prior Claim will not be considered until you have a loss after October 1 2021. FEMA 2.0 is going to wipe the slate clean. But under FEMA 2.0 the surcharge incurred for a claim within the last 20 years only applies to claims filed after FEMA 2.0 goes into effect. Which is October 1 this year.

Under FEMA 2.0, flood policies will not be rated on a flood zone map. They will be rated on:

• geographic location
• property characteristics
• policy characteristics