FEMA upgrades its flood insurance option

Unfortunately, most home insurance policies exclude flood-water damage and the effects of rising water from inadequate drainage and wind-driven rain. But government flood insurance is available to all Dorchester County owners and renters of insurable property, no matter if their flood risk is high or low. And, according to the Federal Emergency Management Agency, that program just got better.

Dorchester County is well acquainted with major storms, with Hurricanes Isabel and Irene and Superstorm Sandy all causing local floods in this century. As FEMA explains, people live in one of four flood zones, with Zone A being high risk (one percent chance of flooding annually). In this county, Zone A includes directly along the Choptank River from Caroline County to the north and west of Cambridge. The Neck District, Taylors Island, Blackwater National Wildlife Refuge, south Vienna and Hoopers Island also are in Zone A.

The Centers for Disease Control and Prevention says flooding is the most common natural disaster in the U.S., and it is the costliest in terms of lives and dollars. Hurricanes have caused above-average flooding over the last four years, and the same is expected in 2022. FEMA says the best way to lessen the impact of flood damage on home or business is with flood insurance, which is why they offer the National Flood Insurance Program.

However, while NFIP has been providing affordable insurance for decades, there has been a disparity in the price of coverage. Owners with lower-valued homes have been paying more than their share in premiums while those with higher-valued homes have paid less. But now, after 50 years, FEMA has updated their methodology with Risk Rating 2.0, and they promise premiums will be more equitable going forward.

Using Risk Rating 2.0, FEMA incorporates more flood-risk variables in their cost calculations: flood frequency, flood types, distance to water, elevation and rebuilding expenditures. So, they can set fair rates that will decrease and increase equitably. In the first year of Risk Rating 2.0, it is estimated that premiums will decrease for 69.7% of all policies in Dorchester County while 29.9% will see an increase amounting to $0-$10 per month.

Not everything will change, as FEMA will continue to uphold existing statutory requirements. For example, rates on most policies cannot increase more than 18% per year. And discounts will still be applied to policies in communities that participate in the Community Rating System, a volunteer program that incentivizes efforts that reduce a locality’s flood risks beyond the NFIP’s minimum requirements. Dorchester County has participated in the program since 2019.

Private carriers such as Floodsmart Insurance Inc. will say that their policies have advantages over those in the NFIP. For example, they offer broader coverage, and their limit is as high as $5 million, while NFIP’s is $250,000. But they also admit that private carriers are not available in every area, have questionable longevity, can refuse an applicant, and may non-renew a policy. The NFIP, on the other hand, is available in all participating communities, will not decline to accept an applicant, and will never fail to renew.

The National Association of Realtors supports Risk Rating 2.0 because it prices flood insurance for each home individually instead of by the flood zone the house is in, and because it reveals upfront the risk and cost to insure a property so the owner or renter can make better-informed decisions. This will be especially important to residents and business owners in Dorchester County, where 21% of properties currently have greater than a 26% chance of feeling the effects of flooding within 30 years. That statistic will only get worse, promises RiskFactor.com, as a changing environment — new weather patterns, stronger storms, sea-level rise — affects even more properties in the community.

As FEMA puts it, “Purchasing flood insurance is the first line of defense against flood damage and a step toward a quicker recovery following a flood.”

To learn more, visit the section “Risk Rating 2.0: Equity in Action” at FEMA.gov.