Your flood insurance premium is going up again, and that’s only the beginning
The bottom line: your flood insurance premium is going up again -- and under a policy change the
Last time the National Flood Insurance Policy got this type of revamp the results were dramatic. Premiums doubled, tripled and more in flood-prone areas. In one extreme case, the premium on a
"That means insurance is about to become very expensive, and it kind of sounds the bell that these are high-risk areas," said
Premiums through the National Flood Insurance Policy are already rising an average of eight percent this year; the first wave of pricier policies started in April. That brings the average annual price (including surcharges) for a policy holder to
It's all part of a strategy to make the NFIP financially stable. The program is
There are a couple of reasons for this, the most important of which is that the NFIP doesn't charge homeowners like regular insurers do, by analyzing the property's specific risks. Instead, the NFIP charges premiums based on average historical losses in the area and flood maps that are often outdated and incorrect.
That could mean that two neighbors with similar size homes end up paying the same rate, even though one sits on slightly higher ground and is less likely to flood.
The program also struggles with a balance of customers in high-risk areas (think the Keys or
One way the program can make its way out of the red is by charging homeowners the real cost it takes to insure their properties from flood risk. That means getting rid of subsidies and -- inevitably -- raising some premiums.
"
Burke declined to offer specific details on the plan at this early stage, which would likely require congressional approval.
That's not necessarily guaranteed, considering politicians haven't even passed a law to extend the program, which loses authorization on
If there is a lapse (and there have been several in the last year of extensions) it would prevent insurers from writing new policies. Since banks demand flood insurance policies on homes with mortgages, this could slow down home sales.
The last time
But the NFIP is still deeply in debt, and experts say risk-based assessment is one of the best ways out.
Moving to risk-based assessment is like "moving from the 20 yard zone to the end zone," said
The NFIP is also tackling the issue by purchasing reinsurance, basically insurance for itself, for the first time, encouraging homeowners to get an elevation certificate to better assess their risk and chasing a "moonshot" goal of doubling the number of people with flood insurance over the next five years. That number includes those with private insurance, a quickly growing segment of the flood insurance market.
The number of policies they write has spiked considerably in recent years. There was a tenfold jump in primary personal flood insurance policies in
To
For example, he said, a brand new condo in Brickell with a six-figure settlement from Hurricane Irma flood damage has a "very nominal increase" in premiums this year.
"It's a strong showing that they're in it to win it," Jones said.
Private policies, which can be based off of
"The advantage to the consumer from a private market is not always saving money but also the ability to buy policies they can't under the NFIP," said
But if competition within the private market isn't able to keep premium prices affordable, vulnerable
"Many people have been saying for years that the federal flood insurance program is designed to do what it shouldn't do, which is promote development in high risk areas with low insurance costs," Pathman said. "That's what's built our coastal communities for the last 60 years."
Now hundreds of thousands of South Floridians live in areas that will see rising tides in the decades to come. If nothing is done and their flood insurance accurately reflects their risk, premiums might rise.
"At some point if sea level rise comes to the point where flooding in a particular area becomes expected or fairly commonplace one of two things will happen," said
The last time
Pathman said if
"This doesn't have to be a doom and gloom thing. These are solvable and manageable things in the foreseeable future," he said. "If you look at the economics and you look at whats coming and you look at what's already happening, it's all about risk. The risk is already here even if the water isn't."
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