How rising flood insurance costs are affecting homeowners

"Flood insurance is just to keep your property safe, not you. You need to remember the best way to protect yourself from a storm or flood is to not be there when it happens. So evacuate, please. I don't care how high or strong you build. You could still be at risk."

Chris Pulaski, Terrebonne planning and zoning director

Chris Prejean said he received an unpleasant surprise when he got his flood insurance quote.

"I was paying $575 when I lived in Highland Oaks," the Houma resident said. "I moved eight miles to Caro Estates and now I'm looking at least $3,800. The private insurance quote that I got came back at almost $14,000. And I've got a really good job, so if I really wanted to, I could pay it, but I'd rather dump $5,000 a year in a money market account and self-insure in case of flood. If I never use it, I'll have a nice little nest egg when I retire in 25 years. Paying $4,000 for something I hope I never use, that gives me no return for not using it, and that I'll just have to pay again the following year is crazy."

Prejean is not alone.

Houma resident Michelle Pellegrin said she just can't afford the new flood insurance costs.

"They want to charge me $3,500 for a house in an area that has never flooded," she said. "It used to be about $500 a year."

Federal government's new rating system causing higher flood insurance bills

FEMA's Risk Rating 2.0 system is poised to drive up flood insurance costs in a big way, said Dwayne Bourgeois, North Lafourche Levee District executive director.

"FEMA has not released any clear data other than the percentage of people who will see an increase and decrease," Bourgeois said. "They've also done a pretty evil job in my opinion on how they sold it by saying that the people who will see an increase will only see so much more a month."

FEMA said its new policy will allow residents to no longer pay more than their share in flood insurance premiums based on the value of their homes.

"Under the legacy rating system, policyholders did not receive premium decreases," said David Maurstad, who runs FEMA's National Flood Insurance Program. "This is a first for the NFIP and a monumental step in communicating flood risk that is commensurate with the property's unique flood risk. The new rating methodology is correcting longstanding inequities in the current pricing scheme. And we can no longer ignore the fact that some of our policyholders have been unjustly subsidizing other policyholders."

Residents who live in flood-prone south Louisiana, however, are going to feel the brunt of the increase, Terrebonne Planning and Zoning Director Chris Pulaski said.

"The biggest change is how flood risk is evaluated," Pulaski said. "Most policyholders nationally will see a slight increase, but 7% are going to see a much higher increase. Then 4% are going to see even more. We're in that 7% and 4%. Most people have mortgages on their homes. If they live in a flood hazard area, which a lot of people do in Terrebonne, they're required to have a flood insurance policy. But if they can't afford to buy a flood insurance policy, their mortgage company will find out and they will be in default of their loan and risk losing their home."

The new flood insurance rate system, which has already gone into effect for people seeking new policies and starts April 1 for policies being renewed, could cause 80% of the 496,000 National Flood Insurance Program policies in Louisiana to experience sticker shock, Bourgeois said.

Most policyholders face an initial yearly increase of no more than $120, according to FEMA.

"What they don't tell you is how many years you are going to see that increase," Bourgeois said. "The way FEMA is going to do this is by increasing your rate at 18% a year until you hit what FEMA considers your maximum rate."

Flood insurance costs vary depending on your risk. In Louisiana, the average policy costs $726 a year, according to an analysis released by ValuePenguin, an insurance research company. The average policy costs $583 a year in Houma and $619 in unincorporated Lafourche Parish.

The National Flood Insurance Program, the only place most homeowners can get flood insurance, covered nearly 27,000 homes in Terrebonne and Lafourche with a combined value of roughly $7 billion as of Aug. 31, according to FEMA.

Pauline Eschete Trahan said she cannot afford flood insurance even though she lives in an area prone to flooding.

"We've never had it," the Chauvin resident said. "It's too high. On Jan. 8 I was informed that my insurance would no longer cover south Louisiana. To get another one I could afford, I would need an $800 to $1,000 down payment. We're retired, so we have no savings. After having our home insured for 50 years, we had to drop our homeowner's insurance. Ida did severe damage, so we're now living with one of our daughters in her 10-year-old's bedroom while he sleeps on a mattress on the floor of his 18-year-old sister's room. It has greatly impacted our lives."

Housing market strained even more after flood insurance calculations

Jefferson Parish resident Jimmy Guillot said the way flood insurance is calculated now makes it harder to buy a new home.

"I live in Jefferson Parish and work in Houma," he said. "I'm currently looking for a house and all I can tell you is finding a home and applying for flood quotes is a joke with some of these properties. Good luck to everyone with insurances these days. They're helping kill the market for new homeowners."

Jenny Marceaux said the quote she received for flood insurance was more than her homeowner's insurance.

"What really sucks is my homeowners required us to have a flood policy or they wouldn't renew us," the Houma resident said. "We aren't in a flood zone either. It's just sad all around."

Local real-estate agents are concerned that FEMA's new flood insurance rating method could have devastating ripple effects on the housing market.

"As a realtor, I am concerned the new flood 2.0 Risk Rating method could push homeowners out of their current homes in certain areas by making flood insurance simply unaffordable," Houma real-estate agent Jenny Palm said. "FEMA claims the new method to calculate flood insurance will be easier to understand and better reflect a property's flood risk. However, a national system that works for the East Coast or Midwest won't work for us because it's not just about elevation and proximity to water. Our impressive levee system should be the most important part of the formula and as of now we don't have solid answers on how strongly that will affect the calculations."

Houma-based Realtor Cynthia Pellegrin compared Risk Rating 2.0 to a similar measure passed in 2012 called the Biggert-Waters Act. It caused flood insurance costs for some south Louisiana homeowners to jump from a few hundred dollars a year to $20,000 or more.

"There may be a few changes, however, it will affect the market in our area just the same," Pellegrin said. "The prices we are being quoted are much higher that they are publishing. It is affecting areas that mortgage companies are not even requiring flood insurance. I have a home that my mortgage does not require flood insure for. It was running $500 a year and now will cost $3,500 a year to cover because of lapse in coverage. All FEMA is saying is an increase of 18%. If you purchase a new flood policy you will pay an exorbitant amount."

Homes in south Terrebonne or south Lafourche will be rendered unaffordable or unsellable, Pellegrin said.

"When your flood insurance costs as much as the note on the home no one will be able to afford it," she said. "I really think this was initiated without enough research. We will not be alone in this. All coastal and river areas will be affected. The public is not aware of what is coming. No way we can support the cost this way. This will put the new home buyers in our area completely out of purchasing a new home. The ripple effect will cripple the market."

Lawmakers making efforts to stall Risk Rating 2.0

Louisiana's two senators, John Kennedy, R-La., and Bill Cassidy, R-La., joined with Democratic New York Sen. Kirsten Gillibrand to introduce the Flood Insurance Pricing Transparency Act to help Louisiana residents understand how FEMA calculates flood insurance.

"Louisianians need flood insurance, but the Biden administration's Risk Rating 2.0 regime is making it unaffordable," Kennedy said. "The Flood Insurance Pricing Transparency Act would shed light on how FEMA sets flood insurance prices so that Louisiana families can better protect their biggest investments -- their homes."

A FEMA spokesperson said Monday that the development of the new rating system method "exposed longstanding inequities in pricing, and we cannot continue to ignore our policyholders who have been unjustly subsidizing other policyholders for decades. Equity in Action corrects this injustice and speaks to why it is imperative that we implement the new rating system now."

Though FEMA recognizes and shares concerns about flood insurance affordability, the agency does not have the authority to set rates, the agency said.

"That's why in April 2018, FEMA delivered an Affordability Framework to Congress with programmatic and regulatory changes that address affordability concerns to help policymakers consider how to provide targeted assistance to existing and potential policyholders," the spokesperson said. "The Affordability Framework provides options to ensure that the updated premium rates both accurately reflect the current assessment of risk while recognizing the importance of equitable rates."

In the meantime, Pulaski said no amount of insurance can protect people from a dangerous storm, just their properties.

"Flood insurance is just to keep your property safe, not you," he said. "You need to remember the best way to protect yourself from a storm or flood is to not be there when it happens. So evacuate, please. I don't care how high or strong you build. You could still be at risk."

Chris Pulaski, Terrebonne planning and zoning director