Florida flood insurance costs are about to explode. ZIP codes closest to the coast will pay the most

Events of the past year have convinced more Florida homeowners of the need to carry flood insurance.

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.

Few homes have flood insurance, even in Florida

Although Florida has the largest number of NFIP flood insurance policies of any U.S. state — 597,967 of 2.2 million in the U.S., FEMA data shows, the percentage of covered homes remains low.

Florida has 3.8 million detached single-family homes, according to 2020 census figures. The number of FEMA flood insurance policies are just 15.7% of that total. In South Florida's tricounty region, the percentage is 20.8%.

The actual percentages of homes with flood insurance are likely to be a little different. The above estimates don't take into account private flood insurance policies, which are increasing but still a fraction of the number of federally-backed policies. And the estimates exclude attached single-family homes, such as townhomes. The percentage also does not include condominiums, which are typically covered by blanket commercial policies.

Experts advise every Florida homeowner to buy flood insurance because flooding can happen throughout the state, as during last fall's hurricanes.

But many buy flood insurance only when required, such as home loan borrowers with federally backed mortgages who live in high-risk flood zones.

Flood insurance required for some with Citizens insurance

This year, a new set of homeowners are required to buy flood insurance. Customers of state-owned Citizens Property Insurance Corp. who live in high-risk flood zones are required to also carry flood insurance.

That mandate, enacted by the state Legislature and governor last year, took effect on April 1 for new Citizens policyholders and on July 1 for renewing policyholders.

Under the new law, all Citizens policyholders will have to buy flood insurance by 2027.

According to Citizens data, 228,203 of the company's 1.2 million customers are now required to buy flood insurance. Of them, 105,763 are in Broward, Palm Beach or Miami-Dade counties.

When enacted last year, the law also required condo owners covered by Citizens to buy flood insurance. They were exempted, however, by a new law that was passed during the just-completed spring Legislative session and now awaits the governor's signature. The change followed complaints that flood insurance is unnecessary for residents on upper floors of multistory buildings and for those covered by commercial policies that cover all units.

Although the mandate remains in place legally, Citizens has stopped sending notices to condo owners telling them they must buy flood insurance at renewal time, Citizens spokesman Michael Peltier said. Once it is signed, condo owners who bought coverage will be able to drop it.

If they bought FEMA coverage, they can request refunds if their policies have not yet taken effect, the NFIP's website states.

Because the flood insurance requirement for renewing Citizens customers won't take effect until July 1, Ryan Papy, president of Palmetto Bay-based Keyes Insurance, says it's still a bit early to gauge the impact.

"There hasn't been that much sticker shock," Papy said in an email. "Many (premiums) in Miami-Dade County have gone down."

But he added, "We do see issues when some clients are purchasing new property." The difference between a new owner's premiums and the capped rates paid by the previous owner can sometimes "be extreme," he said.

Save money on the private market?

Florida homeowners hit hardest by rising NFIP rate hikes might ask their agents to see if they can save money by checking out the private flood insurance market.

Neptune Flood, the nation's largest private flood insurer with more than 150,000 clients, can save policyholders up to 25% off the cost of comparable NFIP coverage, Neptune spokeswoman Loren Pomerantz said by email.

Private flood insurance satisfies requirements of both federal mortgage guarantors and Citizens, according to Pomerantz and Peltier.

Pomerantz said Neptune's sales in Florida have increased in recent months. Sales climbed 20% in areas hard hit by Hurricane Ian prior to the new Citizens mandate taking effect. In high-risk flood zones, sales have increased 25% since April 1 compared to the same period last year, she said.

Private flood insurance also offers coverage that far exceeds the NFIP's $250,000 cap for structural damage and $100,000 limit for personal property damage. "We can cover homes for up to $4 million in building coverage and $500,000 of personal property," she said. "Additional coverage options not available through the NFIP include pool repair and refill, replacement cost on contents, temporary living expenses and more. This allows a homeowner to adequately cover their property and protect their families in the event of a flood-related loss."