Changes to Flood Insurance

Flood insurance for new policyholders in Southwest Florida is due for an increase. FEMA is set to release its new method of assessing your property to calculate how much you will pay to cover your home or business from a flood.

80% percent of Floridians will see an increase in their flood insurance, and 91% of Lee County residents. 9% will pay at least $20 more a month, while 3% will save an extra $2 dollars per month.

The increase is for new policyholders, so homeowners who decide they want flood insurance through FEMA’s National Flood Insurance Program will see the Risk Rating 2.0 rates. Or, if they are building a new house and they have to have flood insurance, they’ll see the Risk Rating 2.0 quote.

The increase for existing policyholders doesn’t go up until April 1, 2022. FEMA gave them six months due to concern about drastic increases. Even then, their policy has to renew before they see the new rate. If you have flood insurance and your policy doesn’t renew until July 2022, for instance, it won’t increase (or decrease) until July 2022.

For around 50 years, the National Flood Insurance Program has subsidized flood insurance by calculating premiums based on flood zone maps, not individual homes, so some homeowners have been paying far less than their fair share, while others have been paying much more. Risk Rating 2.0 is meant to correct that by assessing a building’s actuarial flood risk.

“This is the largest change to the National Flood Insurance Program in its 50-year history,” said Chris Heidrick, principal of Heidrick Company Insurance of Sanibel. “It totally changes the way homes are rated. And it really changed things from a very rudimentary rating structure that was created in the 1970s to one that does a much more accurate job of assessing flood risk. For each individual structure. It is a much more sophisticated structure.”

According to FEMA, as well as many Southwest Florida residents, the area is at a high flood risk year-round.

“Overall, it is the right thing for the National Flood Insurance Program to put that program on a path of sustainability; the National Flood Insurance Program is about $20 billion in debt, and about $16 billion has already been forgiven,” Heidrich said. “This is a program that operated fine up until about 2005. And when Hurricane Katrina hit, the flaws in the way that this program was structured were exposed.”

If you are planning on selling your house or buying a new one, whatever the flood insurance policy is on the property already can be transferred directly to the next buyer of the house. This means you could see two houses right next to each other, one with flood insurance and one without, and the house that already has it will have a policy that could be almost 80% cheaper than the house right next door.

It’s going to be a gradual, year-by-year increase, because federal law won’t allow a rate increase of more than 18% per year.


Chris Heidrick (Heidrick & Company Insurance) & Dave Arter (Private Client Insurance) Presentation to Sanibel & Captiva Association of REALTORS®

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