How can I find out how much my flood insurance is rising?
A few different options. FEMA, which oversees the National Flood Insurance Program, has released projections by state, parish and ZIP code. We’ve compiled those figures into an interactive map that allows you to search by ZIP to find out what the average increase will be for single-family homes in your area. You can search the map here. Keep in mind that increases are limited under federal law to 18% annually, so the total hike will be phased in over the course of years.
For more specific information for your home, insurance renewal notices often contain a line called “full risk premium.” That will tell you how much you’ll pay once your total increase is phased in.
Finally, you can try asking your insurance agent, who may have access to enough data to provide you with an estimate.
Why are flood insurance rates increasing?
FEMA has overhauled its system for setting premiums under a program called Risk Rating 2.0. The idea behind the program is to evaluate the actual flood risk of each individual home through a range of factors. Those factors are then run through a complex algorithm to compute the premium.
The new system abandons the older one based on FEMA’s flawed flood maps, which did not evaluate the risks of each property. However, the new system is difficult to understand, and much of the data used in the algorithm is considered proprietary and not available publicly. That has led to strong criticism of FEMA from those who say the agency has not been sufficiently transparent in the setting of new rates.
What are the factors used to set the new rates?
The algorithm uses a wide range of factors. They include the likelihood of various forms of flooding – from rain to storm surge – as well as distance from water, construction type, ground elevation, first floor elevation and levee strength. Another key element is the cost of rebuilding after a flood.
Will flood insurance still be required?
Providers of federally backed mortgages will still require flood insurance for those living in the flood zones FEMA has previously defined as high risk, those beginning with the letters ‘A’ or ‘V.’ Those living in zones that begin with ‘X,’ ‘B’ or ‘C’ are generally not required to buy a flood policy, though many residents opt to purchase one anyway, given Louisiana’s risks. The zones are far from an exact science – they are one reason FEMA has opted to design a new system – and they should not be taken to mean homes are not at risk.
Why is FEMA making this change?
FEMA says the new system will be fairer since it evaluates the risk of each home. That would do away with the old practice where premiums for pricey beachside villas were essentially subsidized by older, less expensive homes. But in Louisiana, nearly everyone lives near water, and those residents are often working-class families. That has led to fears of unintended consequences and concerns of families being priced out of the housing market, especially with homeowners’ insurance also rising precipitously.
Beyond that reasoning, FEMA is also seeking to make the flood insurance program more sustainable. It is currently $20.5 billion in debt, and setting premiums in a way similar to how the private sector operates would allow it to begin putting its finances in order.
Is Louisiana more at risk than other states?
In many ways, yes. Louisiana has more flood insurance policies per capita than any other state, not surprisingly, given our low-lying geography, susceptibility to storms, erosion, subsidence and risks related to climate change. It is not seeing the steepest increases on average – Louisiana is fifth in the nation at 134% – but it has by far the highest number of policies in the top 5, and some of the states seeing higher average increases have very few policyholders. Louisiana is also home to the ZIP code with the highest projected increase in the country: 70082 in the Pointe a la Hache area, which is projected to see a 1,098% boost, to an average annual premium of $8,058 from the current $673.
