Why Are Flood Insurance Rates Increasing?
What You Need to Know for Your Home or Business
If your flood insurance bill has gone up lately, you’re not alone – and you’re not imagining things. Across the country, property owners are seeing increases in their premiums. Understandably, that’s leading to many questions: Why is this happening? Will it keep going up? And what can you do about it?
At America’s Flood, we understand that this can be frustrating, so we’ve created this guide to help you understand the bigger picture and learn why this is happening.
While the rising cost of flood insurance may be frustrating, there are ways to protect your property while ensuring you get the best coverage at the best price. Here’s what you need to know.
More Flooding, More Risk
Climate change is no longer speculation. It’s happening. Across the U.S., there are:
- More frequent and severe storms
- Increases in rainfall and flash flooding
- The coastline continues to erode alongside a rising sea level
All of this can result in increased flooding, which can lead to a higher number of claims that insurance companies receive, potentially affecting your premiums, especially in areas with higher risk.
Changes to FEMA’s Risk Rating System & NFIP Price Increases
In 2023, FEMA created a new system to assess flood risks. This new system is called Risk Rating 2.0. Previously, they used a model from the 1970s that failed to incorporate catastrophe models, data from private enterprises, and current actuarial science.
The new model provides more accurate cost assessments, which results in some people paying more due to the new system and others paying less. Although Risk Rating 2.0 was fully implemented in 2023, some homes and businesses have yet to reach their adjusted premiums.
If you have an NFIP (National Flood Insurance Program) policy and noticed your rates have increased each year, it may be because you have not reached your fully adjusted premium. To help offset the adjusted premiums, FEMA implemented an annual cap discount. You will find this discount on your policy and can expect it to decrease each year until you reach the full premium assessed by risk rating 2.0.
It’s important to note:
- This only applies to NFIP policies.
- Many properties are still in the process of reaching their full premium under this system.
- Private market flood insurance increases or decreases its rates based on its risk assessment of your property.
Increased Rebuilding and Repair Costs
In addition to the increased risks, the replacement and repair costs of your home or business after flooding have also increased. The cost to rebuild or repair a home or business has gone up significantly, and this is a factor used to determine premiums. That price increase translates into an increase in the cost of claims for flood insurance companies, forcing them to increase premiums further.
How America’s Flood Can Help
If all this has you feeling hopeless about your flood insurance costs, don’t worry. America’s Flood is here to help. We provide personalized assistance to help you find the most affordable policy for your home or business that still gives you the best coverage.
At America’s Flood, we shop FEMA and private flood markets to find the most affordable policy for your property. We offer:
- Free quotes for your home or business
- No agency fees
- Access to the best flood markets available
Seeing your rates increase year after year can be frustrating. But you cannot overlook the importance of flood insurance. Flood damage can easily cost you significantly more than the premiums of keeping your home or business covered.
At America’s Flood, we believe you deserve coverage you can count on, at a price that makes sense. Get started with your free quote today – let’s ensure you’re getting the protection you need at a price that makes sense.
