It’s not hard to get a bit confused about when flood insurance coverage comes into effect or how flood insurance policies are created. In fact, in the ever-changing industry of insurance, you can expect things to change regularly. Fear not! Better Insurance Group stays updated with new information so you don’t have to.
Here’s what you need to know:
- FEMA is updating the National Flood Insurance Programs (NFIP) risk rating practices through the use of a new pricing methodology called Risk Rating 2.0.
- Risk Rating 2.0 is designed to “to enable FEMA to deliver rates that are actuarially sound, equitable, easier to understand and better reflect a property’s flood risk.”
- All policies renewed on April 1, 2022 are subject to this new methodology.
- Risk Rating 2.0 has an impact on the creation of new policies.
- You can obtain flood insurance when purchasing your home and have a lender, with no waiting period, otherwise, there is still a 30-day waiting period if you want a policy thereafter, and also one if there is no lender on closing day.
The new methodology allows FEMA to equitably allocate premiums based on the value of someone’s home and the specific and unique flood risk of their property. It was previously determined that many policyholders with lower-value homes were paying above what they should and policyholders with higher-value homes were paying less.
To provide a more equitable way forward, FEMA is now using updated methods to address flood risk variables. These include:
- Flood frequency
- Multiple flood types (storm surge, river overflow, coastal erosion, heavy rainfall)
- Distance to the nearest water source
- Specific property characteristics (elevation, cost to rebuild on the property, etc.)
To read the press release from FEMA, please visit here.
Don’t wait until the storm is on its way! Call us to get your flood policy started today.
