Flood Insurance

Standard homeowners’ insurance does not cover flooding, that's why it is important to have financial protection from floods that cause damage to structures and property.

In 1968, Congress created the National Flood Insurance Program (NFIP) to help provide a means for property owners to financially protect themselves. The NFIP is administered by the Federal Emergency Management Agency (FEMA), which works closely with more than 80 private insurance companies to offer flood insurance to homeowners, renters, and business owners.

The NFIP offers flood insurance to homeowners, renters, and business owners if their community participates in the NFIP. Participating communities agree to adopt and enforce ordinances that meet or exceed FEMA requirements to reduce the risk of flooding.

Risk Rating 2.0

FEMA has updated the National Flood Insurance Program's (NFIP) pricing methodology using a system called Risk Rating 2.0. The methodology enables FEMA to deliver rates that are actuarily sound, equitable, easier to understand and better reflect a property’s flood risk. FEMA implemented the system using a phased approach to rolling out the new rates.

Current National Flood Insurance Program policyholders can contact their insurance company or insurance agent at any time to learn more about what Risk Rating 2.0-Equity in Action means to them.

PHASE I

New policies beginning Oct. 1, 2021, will be subject to the new rating methodology. Also beginning Oct. 1, existing policyholders eligible for renewal will be able to take advantage of immediate decreases in their premiums.

PHASE II

All remaining policies renewing on or after April 1, 2022, will be subject to the new rating methodology.  

FEMA continues to engage with Congress, its industry partners and state, local, tribal and territorial agencies to ensure clear understanding of these changes.  

What Did Not Change Under Risk Rating 2.0?

Limiting Annual Premium Increases

Existing statutory limits on rate increases require that most rates not increase more than 18% per year.

Using Flood Insurance Rate Maps (FIRMs) for Mandatory Purchase and Floodplain Management

FEMA’s flood map data informs the catastrophe models used in the development of rates under Risk Rating 2.0. That is why critical flood mapping data is necessary and essential for communities. It informs floodplain management building requirements and the mandatory purchase requirement.

LOMA and LOMR-F Process

LOMAs and LOMR-Fs are still available to property owners wanting to remove their properties or structures from the floodplain. The process remains the same, and an elevation certificate will be required for the application.

Maintaining Features

FEMA will be maintaining features to simplify the transition to Risk Rating 2.0 by offering premium discounts to eligible policyholders. This means:

• FEMA continues to offer premium discounts for pre-FIRM subsidized and newly mapped properties.

• Policyholders are still able to transfer their discount to a new owner by assigning their flood insurance policy when their property changes ownership. This transfer is encouraged, as an existing policy will remain on the maximum 18% glide path to the full-risk rating, while a new policy would be introduced at the full-risk rating with no glide path.

• And, discounts to policyholders in communities who participate in the Community Rating System will continue. Communities will continue to earn National Flood Insurance Program rate discounts of 5% - 45% based on the Community Rating System classification. However, since Risk Rating 2.0 does not use flood zones to determine flood risk, the discount will be uniformly applied to all policies throughout the participating community, regardless of whether the structure is inside or outside of the Special Flood Hazard Area.                

Newly Mapped?

Newly Identified as Lower Flood Risk

When going from a high-risk zone (e.g., Zone A) to a moderate-low risk zone (i.e., Zone X), the mandatory purchase requirement is removed, though lenders always reserve the right to require it. Because flood zones and Base Flood Elevations (BFEs) are no longer a rating variable, there is no change in premium when the map changes if the property owner chooses to continue coverage. Similarly, a decrease in BFE will result in no change in premium when the map changes.

Other Changes in Flood Risk

Some property owners and renters may be in an area where the BFE increases or the high-risk flood zone increases to a higher risk. Since flood zones and BFEs are no longer a rating variable under RR 2.0, this means there would be no change in their RR 2.0 premium when the map changes. Policies already grandfather-rated from the previous rating system will be on a glide path of 18% annual increases until they reach full-risk rates (except those that are statutorily on a 25% glide path, like pre-FIRM secondary homes and businesses). 

For property owners and renters that are newly identified as being in a high-risk flood area from the moderate- to low-risk flood area, the National Flood Insurance Program (NFIP) offers a one-time cost-saving option called the Newly Mapped Discount. If there is a federally backed loan on the property, the federal mandatory purchase requirement applies. As a result, most lenders will require flood insurance. Property owners and renters previously designated outside of the Special Flood Hazard Area, and newly identified to be in a Special Flood Hazard Area, and whose policy is effective within 12 months of the effective date of the new map, may be eligible for a one-time Newly Mapped Discount. Upon renewal, policy rates will then increase on a 15% annual glide path until they reach their full-risk rate. If the property is sold, the discounted policy can be transferred to the new owners. Property owners must maintain continuous coverage to keep their Newly Mapped discount.