As a native southwest Floridian, and I have heard every excuse in the book as to why someone doesn’t think they need to purchase flood insurance for their home. Some people think it’s too expensive, some people think they should only have it if they are in a high-risk area, and even some think their lands are “protected by some ancient powers” (I’m dead serious – quite a few residents around here have this belief). Flood insurance quoting and rating is about to change in a big way, and I highly suggest everyone at least get a price and strongly consider getting flood insurance in place before this occurs - especially those in higher-risk areas.
Contrary to popular belief, flood insurance is very inexpensive when you weigh the coverage and the risks associated with that coverage. According to a recent study, 90% of natural disasters in the U.S. involve a food, making flooding the most frequent natural disaster in the country. If you own a home, you should arguably be budgeting to insure your home against floods - whether you’re required to do so by a lender or not. Flood insurance coverage for your home can be as little as $250 per year in low-risk areas which equates to less than 70 cents a day.
Flood Insurance Rates are changing beginning October 1st, 2021.
Most flood insurance issued to homeowners is issued in conjunction with FEMA and the National Flood Insurance Program (NFIP). FEMA and the NFIP are overhauling the way flood insurance rates are calculated, which will likely result in big changes to the cost someone is quoted on their flood insurance. Beginning on October 1, 2021, they are using a new rating methodology called “Risk Rating 2.0”. The way flood insurance is calculated, quoted, and underwritten has not changed significantly since the 1970’s. With the data and technology available today, FEMA and the NFIP has determined it’s time to change the way flood insurance is quoted so the risk is more evenly distributed amongst those who are most at risk. Current data suggests the way flood insurance is currently quoted unfairly distributes higher rates to properties with lower risks. The new rating methodology is set to curb this by passing on higher rates to those in higher-risk areas.
According to studies completed by FEMA, nationwide they expect around 77% of properties see an increase in the rate quoted for a new policy. Because Florida is geographically in an area more at-risk to flooding, 80% of current policyholders will see a rate increase.
No mortgage, no flood insurance, right?
Wrong. Most homeowners don’t see all the value that lies in a flood insurance policy. Not only are you covered for flooding by purchasing flood insurance, but you could be locking in a rate you will never be able to get again the future. Not only that, but you can pass this flood insurance (and the lower rate) on to the next owner of the home. Flood insurance issued by FEMA and the NFIP has a limit in place preventing a current policy rate by increasing more than 18% per year. 18% sounds like a large jump, but as an insurance agent, I fully expect areas that are at a higher risk of flooding to see larger and more dramatic rate increases when these new changes take effect. 18% each year is a lot better than 200% right out of the gate!
Purchasing and maintaining flood insurance now could increase the selling value of your home in the future.
So this sound like a bit of a stretch, but just follow me here. Since flood insurance can be passed down from one owner to the next, you could be potentially increasing the selling potential of your home. If your home is in a high-risk area, selling your home for the best price could be contingent on your buyer securing a mortgage – which means they will need flood insurance. If you have flood insurance in place, your rate is passed onto the new buyer. This could (and likely will) mean significant savings for that buyer. Not only that, but it could mean the difference in getting that buyer approved for their mortgage and getting the selling price you’re asking for. With the rating methodology set to change in the way it is, a lot of insurance industry experts expect there to be hidden value in a maintained flood insurance policy due to this. A well-maintained, longstanding flood insurance policy could have a rate that is thousands of dollars per year less than a “new” flood insurance rate would be.
If you are on the fence about flood insurance, there has never been a better time to secure it then right now. Give our office a call and request a flood insurance quote today. We’d be happy to provide a completely unbiased quote with no pressure or strings attached. We find value in educating the consumer on their insurance purchase, and if you don’t know how much it even costs, how can you be informed?!
David Kronk Jr
Owner, Evolve Insurance Agency