More May Need Flood Policies, Now Costlier

New buyers of flood insurance since then are paying premiums under the Federal Emergency Management Agency's "Risk Rating 2.0" system. Existing policyholders will start being charged the new rates in April, with their increases limited to 18% per year.

FEMA said the new rating system more accurately reflects flood risk and ensures that National Flood Insurance will be around for generations to come. Where it used to base rates on broad flood zones and property elevations, the program now takes into account the property's distance from water and the cost to rebuild.

Most will be charged more for flood insurance, an average of $120 a year more to start. About 5% will see increases of more than $240 per year, especially in the most flood-prone shore areas. Nationwide, the average flood insurance premium is $700 per year, according to FEMA.

The new rating system will be good news for the one-fifth of New Jerseyans covered by the program whose annual premiums will go down.

Although the rating method has changed, the requirement to buy flood insurance hasn't changed -- yet.

In the zone where 100-year floods occur -- the highest FEMA designated of risk -- flood insurance is required for government-backed mortgages and other loans from banks. Yet much of the flood damage and losses covered by flood insurance occur outside that zone.

From 2017 to 2019, nearly 40% of the flood claims received by FEMA were for properties where insurance wasn't a mortgage requirement, the agency told Congress in 2020.

Last year the Government Accountability Office recommended that federal rules be updated to require more high-risk homes to have flood coverage. FEMA's flood maps haven't kept up with changing climate science and a better understanding of how heavy rainfall contributes to flooding, the GAO has said.

The research firm First Street Foundation estimates that 14.6 million U.S. properties are at substantial risk of flooding. But there are only 5 million National Flood Insurance policyholders, so changes that encourage or require more owners of properties at flood risk to have insurance would reimburse some of their losses and allow lower rates for all covered. The new more realistic rating system was prompted in part by the $20.5 billion in FEMA debt from paying out more in claims than its insurance rates were bringing in.

Wider application of mortgage requirements for flood insurance would still leave the flood-insurance decision to property owners. They don't have to obtain a mortgage or buy a home that subjects them to the requirement.

Perhaps there are other ways to ensure that property owners accept responsibility for their flood risk. For example, access to disaster aid for predictable losses could be prorated for the uninsured based on their risk level.

The mortgage requirement, though, effectively overcomes the tendency of people to downplay risks they haven't experienced and put off preparing for what they consider rare events. Unless and until officials find the political courage to start letting developers and buyers shoulder some of the risk from many recurring forms of disaster covered by federal disaster relief, adding flood coverage to the insurance requirement for more homes looks like the best way to spare the general public from subsidizing the risk-taking of others.