Flooding caused by hurricanes Ian and Nicole caught hundreds, if not thousands, of homeowners across the state by surprise, and without flood insurance.
Similarly, many homeowners affected by last month’s historic rainfall in eastern Broward County had no flood insurance and learned tragically that damage caused by water rising from the ground was not covered by their normal homeowner insurance.
It’s not just flood victims who are experiencing hard lessons about flood insurance.
Just as homeowners are realizing the increased risks of going without flood coverage, the Federal Emergency Management Agency has released data showing that coverage costs are exploding for properties in coastal areas most vulnerable to flooding.
The cost hikes stem from mandates by Congress to require rates charged by the National Flood Insurance Program, which is run by FEMA, to reflect the cost of flood risk to individual covered properties, and to pay down the program’s deficit, which was $20.5 million as of last November, according to FEMA.
The result is a new risk pricing model called Risk Rating 2.0, which took effect on Oct. 1, 2021, for new NFIP policies and on April 1, 2022, for renewing policies. Rather than set rates solely based on a property’s elevation within a zone on a Flood Insurance Rate Map, the new approach considers more risk variables such as flood frequency, types of flooding, and distance to a water source, along with individual property characteristics like elevation and the cost to rebuild, FEMA’s website states.
Improved modeling, however, is of little comfort to homeowners who will have to pay more for flood insurance at the same time costs of regular multiperil property insurance are skyrocketing.
Recently, FEMA released a spreadsheet that compared average premiums currently and how high they’ll climb under the new pricing model.
For example, homeowners in Boca Raton’s 33432 ZIP code can look forward to a whopping 229% flood insurance premium increase, from an average $950 per policy to $3,128.
In Broward County, the 33305 ZIP code that includes Wilton Manors and Fort Lauderdale neighborhoods near the Middle River will pay 209% more, from $1,099 to $3,400.
In the 33315 zip code, which includes Fort Lauderdale’s Edgewood neighborhood that was among the hardest-hit by last month’s flooding, average rates will increase by 64% — from $863 currently to $1,420.
These numbers are averages. Within each ZIP code are less expensive homes with cheaper coverage costs and pricier homes that will cost even more to insure.
Unsurprisingly, homes nearest the coast, particularly in low-lying areas, cost far more to insure than homes on higher ground in western suburban cities.
For example, homeowners in Coral Springs’ 33071 ZIP code are looking at a total premium increase of just 17.6% — from $669 to $787.
FEMA says the new pricing model will also drive down the cost of flood insurance for customers with low-risk characteristics. Yet, none of South Florida’s ZIP codes will see average rates decrease, FEMA’s data shows.
Not everyone facing rate increases will have to pay the higher premiums immediately. While homeowners who previously did not carry NFIP flood insurance will have to pay the new higher prices if they want a new policy, price hikes for existing policyholders are capped at 18% a year for homesteaded properties and 25% annually for second homes or investment properties, until they reach the new rates.
If the total increase is 18% or less, affected homeowners will pay it just once — presumably until FEMA raises rates again, whenever that happens.
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