The Federal Emergency Management Agency’s (FEMA) new risk rating changes for its National Flood Insurance Program (NFIP) could lead to millions of homeowners seeing noticeable increases in flood insurance costs, a new report by ValuePenguin.com has found.
ValuePenguin’s analysis of the FEMA’s new risk rating system for the NFIP – dubbed “Risk Rating 2.0,” which takes effect October 01 – found that 3,846,702 homeowners will see rates increase under the new rules, while only 1.2 million homeowners will see their flood insurance premiums decrease.
Other key findings of ValuePenguin’s report include:
ValuePenguin insurance data analyst Andrew Hurst warned that homeowners should be aware of the limitations of a federally backed insurance flood policy, particularly when the coverage has a 30-day waiting period before it takes effect.
“Between the time you purchase a policy and the date when that policy becomes effective, you effectively have no coverage from flood damage,” Hurst explained.
The analyst also cautioned that with the hurricane season approaching, homeowners cannot just purchase flood insurance right before a storm hits. Hurst suggested that they should consider purchasing private flood insurance, which can be cheaper than the NFIP, allows for more customization, and has a shorter waiting period (10-14 days, compared to 30 days).
Read more: Flood premiums set to soar
An earlier report by First Street Foundation in February projected that homeowners living in high-risk floodplains will be charged as much as four times their current NFIP premiums. In response to this, FEMA issued a statement explaining that First Street’s analysis is “misinformed and setting public expectations that are not based in fact.”