Buyers closing October 1st or after should understand upcoming flood insurance changes. The yearly rates for flood insurance policies under FEMA’s National Flood Insurance Program (NFIP) will change on October 1 per the new Risk Rating 2.0 system.
Important Dates:
Phase I: Starting October 1, 2021, new NFIP policies will be subject to the 2.0 rating method.
Phase II: All NFIP policies not included in Phase I will be subject to the new rating method on or after April 1, 2022.
What You Need to Know:
It is expected that most homeowners in our area will experience rate increases due to their coastal exposure and high value properties.
Premium increases will transition gradually and will be capped at 18% annually until the full-risk rate for the property is reached. FEMA refers to the 18% gradual increase as the Glide Path.
Current NFIP rates are not grandfathered in; however, if a buyer confirms the seller has an existing NFIP flood policy, a new policy can be written using the seller’s Glide Path. The seller will need to provide a copy of their current policy Declarations page; the minimum information needed includes the flood insurance carrier, policy number, expiration date, and original policy date.
Buyers closing on a property without an existing flood policy should know that, starting October 1, rates will be considerably higher than current flood rates as the 18% rate cap does not apply. This significantly higher pricing also applies to new construction.
Frequently Asked Questions:
Is it true that Flood Elevation Certificates are no longer required when purchasing flood insurance?
Yes, while that is true we are finding that homes with a flood elevation certificate showing the property positively elevated are receiving lower pricing.
How can my buyer secure preferred pricing for their flood insurance?
We recommend confirming the seller has a flood insurance policy in place through the NFIP and obtaining a copy of that policy which will enable the buyer to obtain preferred pricing for their new flood policy.
In addition, buyers can review policy limits and deductibles to further customize the policy.
What if the seller does not have a flood policy in place?
In addition to coverage through the NFIP, new home buyers can purchase their coverage through Private Flood markets which have been competitive for a good number of property owners in our area.
Flood insurance is an essential piece of overall property protection. It is important to consult with a trusted advisor who can review carrier options and coverage and can offer the best pricing for your clients.
Andrea Pelletier, CPRIA, CPIA is Client Advisor and Partner at Gulfshore Insurance specializing in Private Risk Services. Andrea works with successful individuals and their families on creating and customizing package insurance solutions in the areas of luxury homes, car collections, jewelry, fine arts, watercraft, and personal excess liability. Comments and questions are welcome at apelletier@gulfshoreinsurance.com
Gulfshore Insurance is a Naples, Florida based insurance agency specializing in home and homeowners insurance, car and auto insurance, boat and yacht insurance, property insurance, umbrella insurance, valuables insurance for fine art, jewelry, wine, and more. Navigating insurance requires an experienced and trusted insurance agent who understands your high net worth risks and exposures. Gulfshore Insurance services Naples, North Naples, Port Royal, Park Shore, Pelican Bay, The Moorings, Naples Beach, Marco Island, Bonita Springs, Sanibel Island, Captiva, Fort Myers, Sarasota, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.
Andrea Pelletier, CPRIA, CPIA is Client Advisor and Partner at Gulfshore Insurance specializing in Private Risk Services. Andrea works with successful individuals and their families on creating and customizing package insurance solutions in the areas of luxury homes, car collections, jewelry, fine arts, watercraft, and personal excess liability. Comments and questions are welcome at apelletier@gulfshoreinsurance.com
Gulfshore Insurance is a Naples, Florida based insurance agency specializing in home and homeowners insurance, car and auto insurance, boat and yacht insurance, property insurance, umbrella insurance, valuables insurance for fine art, jewelry, wine, and more. Navigating insurance requires an experienced and trusted insurance agent who understands your high net worth risks and exposures. Gulfshore Insurance services Naples, North Naples, Port Royal, Park Shore, Pelican Bay, The Moorings, Naples Beach, Marco Island, Bonita Springs, Sanibel Island, Captiva, Fort Myers, Sarasota, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.
Reminder: NFIP Flood Insurance Rates to Change October 1
New rates for all properties insured through the National Flood Insurance Program (NFIP) will go into effect nationwide on October 1, 2021. FEMA is pairing state-of-the-art technology with NFIP’s mapping data to establish a new risk-informed rating plan—Risk Rating 2.0, the largest change to the program in 50 years.
Risk Rating 2.0 uses the latest actuarial practices to set fairer, risk-based rates that better reflect a property’s true flood risk. All NFIP policies—including single-family homes, multi-unit, and commercial properties—will change over to the new rating system.
What is changing:
According to FEMA, the current NFIP pricing methodology has led to policyholders encountering average premium rate increases of $8 per month each year at renewal. After incorporating additional flood information and variables into the pricing methodology, FEMA provided that Risk Rating 2.0 will have the following impacts on current NFIP policyholders’ premium rates:
Nearly a quarter (23%) of policyholders will experience premium rate decreases.
Two-thirds (66%) of policyholders will encounter moderate premium rate increases.
The final 11% of policyholders will experience more significant premium rate increases.
To make the changes more equitable, FEMA will look at detailed flood risk variables such as distance to a water source, flood frequency, flood types, and property characteristics like the cost to rebuild and elevation.
What is not changing:
Setting limits on rate increases. Risk Rating 2.0 maintains limits on rate hikes. Rates may not increase by more than 18% per year.
Utilizing flood mapping. Risk Rating 2.0 will continue to use FIRMs to assess the flood risk, rebuild requirements, floodplain management strategies, and see if a location’s flood insurance is mandatory. FIRMs also remain as tools for creating flood management policies.
Offering discounts. Finally, Risk Rating 2.0 keeps features from the original risk ratings, including premium discounts for pre-FIRM subsidized and newly mapped properties. The discounts for participation in the Community Rating System continue to apply.
NFIP will roll out Risk Rating 2.0 in two phases:
Phase I. Risk Rating 2.0 starts for new policies beginning on October 1, 2021. Renewing policyholders may see discounts on their premiums.
Phase II. Policies with renewals on or after April 1, 2022, will price according to Risk Rating 2.0.
Gulfshore Insurance is a Naples, Florida based insurance agency specializing in business insurance including liability insurance, property insurance, workers compensation insurance, vehicle insurance, business income interruption insurance, cyber insurance, commercial umbrella insurance, and more. Our insurance and risk management advisors are industry specialists for condominium associations, golf and country clubs, oil and petroleum marketers, construction, landscaping, churches and non-profits, and work comp. Navigating insurance requires an experienced and trusted insurance agent who understands your business risks and exposures. Gulfshore Insurance services Naples, North Naples, Marco Island, Bonita Springs, Fort Myers, Sarasota, Lido Beach, Longboat Key, Bradenton Beach, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota
FEMA is updating the National Flood Insurance Program’s pricing methodology to communicate flood risk more clearly, so policyholders can make more informed decisions on the purchase of adequate insurance and on mitigation actions to protect against the perils of flooding.
The 21st century rating system, Risk Rating 2.0—Equity in Action, provides actuarially sound rates that are equitable and easy to understand. It transforms a pricing methodology that has not been updated in 50 years by leveraging improved technology and FEMA’s enhanced understanding of flood risk.
“The new pricing methodology is the right thing to do. It mitigates risk, delivers equitable rates, and advances the Agency’s goal to reduce suffering after flooding disasters,” said David Maurstad, senior executive of FEMA’s National Flood Insurance Program. “Equity in Action is the generational change we need to spur action now in the face of changing climate conditions, build individual and community resilience, and deliver on the Biden Administration’s priority of providing equitable programs for all.”
The National Flood Insurance Program provides about $1.3 trillion in coverage for more than 5 million policyholders in 22,500 communities across the nation. Understanding the magnitude of even the smallest changes of a program of this scale, FEMA devoted thousands of hours to develop the new pricing methodology to ensure equity and accuracy.
In developing the new rates, FEMA coordinated with subject matter experts from the U.S. Army Corps of Engineers, U.S. Geological Survey, and the National Oceanic and Atmospheric Administration along with experts from across the insurance industry and actuarial science to ensure alignment with federal regulations, systems, guidance, and policies.
The new methodology allows FEMA to equitably distribute premiums across all policyholders based on the value of their home and the unique flood risk of their property. Currently, many policyholders with lower-value homes are paying more than they should and policyholders with higher-value homes are paying less than they should.
To provide more equity, FEMA now has the capability and tools to address rating disparities by incorporating more flood risk variables. These include flood frequency, multiple flood types—river overflow, storm surge, coastal erosion, and heavy rainfall—distance to a water source, and property characteristics such as elevation and the cost to rebuild.
The cost to rebuild is key to an equitable distribution of premiums across all policyholders because it is based on the value of their home and the unique flood risk of their property. This has been an industry standard for years.
FEMA is conscious of the far-reaching economic impacts COVID-19 has had on the nation and existing policyholders and is taking a phased approach to rolling out the new rates.
Phase I: New policies beginning Oct. 1, 2021 will be subject to the new rating methodology. Also beginning Oct. 1, existing policyholders eligible for renewal will be able to take advantage of immediate decreases in their premiums.
Phase II: All remaining policies renewing on or after April 1, 2022 will be subject to the new rating methodology.
FEMA continues to engage with Congress, its industry partners, and state, local, tribal and territorial agencies to ensure clear understanding of these changes. For the latest information on Risk Rating 2.0, visit fema.gov.
Ron Lazarto, CPRIA is a Client Advisor and Partner at Gulfshore Insurance specializing in Private Risk Services. Ron specializes in offering customized property and casualty insurance solutions for successful individuals and their families. Comments and questions are welcome at rlazarto@gulfshoreinsurance.com
Gulfshore Insurance is a Naples, Florida based insurance agency specializing in home and homeowners insurance, car and auto insurance, boat and yacht insurance, property insurance, umbrella insurance, valuables insurance for fine art, jewelry, wine, and more. Navigating insurance requires an experienced and trusted insurance agent who understands your high net worth risks and exposures. Gulfshore Insurance services Naples, North Naples, Port Royal, Park Shore, Pelican Bay, The Moorings, Naples Beach, Marco Island, Bonita Springs, Sanibel Island, Captiva, Fort Myers, Sarasota, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.
If you already own a waterfront property, then you are likely familiar with flood zones and flood insurance. If you are someone who is considering the purchase of waterfront property, then now is to time to get familiar with this coverage. Flood risk across the continental U.S. is concentrated along coastlines, and no state has more vulnerable beachfront miles than Florida. Most waterfront properties are considered high risk for flooding, just because of their proximity to the water.
Flood or “rising water” is not a peril that is covered under your typical homeowner’s insurance policy. Flood coverage is purchased as a separate stand-alone policy. The vast majority of all flood policies are purchased through the National Flood Insurance Program (NFIP) which is administered by the Flood Emergency Management Agency (FEMA); however, private options are also available. How much that insurance costs all comes down to the elevation of the building and the characteristics of the flood zone that it resides in.
Properties with direct ocean access are most often located in VE or AE flood zones. These high-risk zones require an elevation certificate before Primary FEMA Flood or Excess Flood quotes can be provided. The elevation certificate provides the base flood elevation as determined by FEMA in addition to the elevations of the garage, machinery, and first-floor living level. Some homes in these areas have elevated living levels which adds to the complexity of the underwriting process. For all areas below the base flood elevation, it’s necessary to confirm whether or not the enclosure is properly vented (in AE zones) or has breakaway walls (in VE zones).
Coverage for waterfront properties can be expensive and intricate, so we recommend looking into this. Interested buyers should be familiar with the complete scope of the house and all that it entails. When your buyers have questions about insuring their coastal property, turn to Gulfshore Insurance for answers. It’s critical to check with an agent early to verify the flood zone and elevation to avoid any surprises after a purchase contract is in place.
Andrea Pelletier, CPRIA, CPIA is Client Advisor and Partner at Gulfshore Insurance specializing in Private Risk Services. Andrea works with successful individuals and their families on creating and customizing package insurance solutions in the areas of luxury homes, car collections, jewelry, fine arts, watercraft, and personal excess liability. Comments and questions are welcome at apelletier@gulfshoreinsurance.com
Gulfshore Insurance is a Naples, Florida based insurance agency specializing in home and homeowners insurance, car and auto insurance, boat and yacht insurance, property insurance, umbrella insurance, valuables insurance for fine art, jewelry, wine, and more. Navigating insurance requires an experienced and trusted insurance agent who understands your high net worth risks and exposures. Gulfshore Insurance services Naples, North Naples, Port Royal, Park Shore, Pelican Bay, The Moorings, Naples Beach, Marco Island, Bonita Springs, Sanibel Island, Captiva, Fort Myers, Sarasota, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.
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FEMA is updating the National Flood Insurance Program’s pricing methodology to communicate flood risk more clearly, so policyholders can make more informed decisions on the purchase of adequate insurance and on mitigation actions to protect against the perils of flooding.
If you already own a waterfront property, then you are likely familiar with flood zones and flood insurance. If you are someone who is considering the purchase of waterfront property, then now is to time to get familiar with this coverage. Flood risk across the continental U.S. is concentrated along coastlines, and no state has more vulnerable beachfront miles than Florida. Most waterfront properties are considered high risk for flooding, just because of their proximity to the water.