Environmental shifts are causing flood waters to rise. Here are some insurance industry factors that may cause your premiums to do the same.
New York weather looks set to get rougher in the years ahead. Knowing the basics of filing an insurance claim may become an essential skill in the near future. And one of the worst offenders of our increasingly wild weather is high water levels.
New York homeowners are increasingly at risk of flood damage to their homes, making investing in flood insurance a smart move. But rates are rising just like the water, so read on to learn what’s behind the price hikes and how policyholders can put adequate protection in place.
Some fast facts about floods and insurance
The Federal Emergency Management Administration (FEMA) lists flooding as America’s most common natural disaster, a fact which drove them to create the High Water Mark Initiative. This program is designed to raise community flood awareness and highlights how the US experienced more than $24 billion in flood damage between 2017 and 2020.
The Initiative mentions that there’s still a mental block in public acceptance of just how much flood danger exists. For example, designated flood zones aren’t solely found in New York’s coastal areas, although properties in those 12 counties are naturally at the greatest risk.
FEMA cautions New York homeowners in lower-risk zones that they’re still five times more likely to suffer flood damage than a house fire over the course of the next few decades. Flood insurance can be an excellent investment, even if your flood map rating is moderate to low. Search your area and discover which flood risk rating applies to you.
It only takes one inch of water to potentially cause $25,000 worth of damage to your home. You can see how much a flood could cost you by using NFIP’s estimating tool or FEMA’s Base Flood Elevation resource. Don’t be confident that homeowners insurance will cover things, either. Most policies don’t—which makes having a separate flood policy crucial.
Why flood insurance rates are rising (and by how much)
The National Flood Insurance Program (NFIP) is the primary provider of flood coverage for homeowners and renters. Flood policies are also available from a limited number of private insurance companies around the country. Unfortunately, the rates of policies from all sources are increasing.
The first reason for significant hikes is that the number of flood-related damage claims is increasing. The second is that flood insurance covers more than one thing. It must protect the structure, its contents, and potentially any vehicles the homeowner has that could be badly damaged or totally wrecked by water.
Coverage rates are also set to rise for certain homeowners due to FEMA’s introduction of the Risk Rating 2.0 system in late 2021, which kicks in universally on April 1. The new rating considers the two price factors listed above while also weighing the shifting data of flood frequency, how close homes are to variously graded risk zones, and which type of flood poses a risk (river, flash, groundwater, or drain and sewer).
The property types that stand to see the biggest rate increases are those in areas with newly applied flood ratings. Vacation homes, second homes, and properties that have been significantly upgraded are also more likely to see higher premiums.
The new rating system has a mixed impact, however. While some homeowners and renters may be paying up to $240 more than last year for flood protection, others could see a decrease of $86 a month. You can search FEMA’s Risk Rating 2.0 database by county to see how your region of New York may be affected by the new pricing structure.
Why flood insurance is worth the money
Nobody wants yet another premium added to their monthly bills. At the same time, even an inch of floodwater can have a massive cost. And policyholders do get significant protection from basic flood insurance policies, which typically offer up to $100,000 for personal property and $250,000 for the structure.
These limits can be increased, and many private providers offer higher minimum protection levels. That said, homeowners must understand that the government doesn’t back private flood insurance policies. Customers who don’t get coverage directly from the federally supported NFIP should carefully vet their provider to feel confident they’ll deliver the necessary funds in a crisis.
People living in communities that participate in the NFIP can buy flood insurance at any time regardless of how high their risk profile is on the flood map—and how many times the property flooded in the past. However, bear in mind that there’s a 30-day waiting period after paying the premium before the policy becomes effective.
This wait could drop to only a day if the flood coverage is purchased within a year and your community is on the lower-risk end of the revised flood insurance rating map. A policy could also go into effect immediately upon closing if you’re buying a flood policy from a private insurer.
FEMA offers more valuable information on its flood insurance FAQ page. This resource helps homeowners and renters better understand how the system works to make sensible insurance decisions.
The NICRIS Insurance team is here to offer advice on the best policies to protect you and your property. We can provide a free, personalized review to match the right policy to your circumstances and potential risks, or you can simply contact us with any questions.