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National Flood Insurance Program Updates

The Federal Emergency Management Agency (FEMA) is updating the methodology used in pricing National Flood Insurance Program (NFIP) policies. The new methodology is called Risk Rating 2.0 and leverages industry best practices and new technology to produce insurance rates that are actuarially sound, equitable and better reflect a property’s flood risk.

What is changing with Risk Rating 2.0?
The new rating methodology considerers more flood risk variables, including flood frequency, flooding type, distance to water source and property characteristics, such as elevation and the cost to rebuild. The purpose of considering these variables is that insurance rates will become more accurate so that policyholders pay premiums that reflect their home’s value and property’s unique flood risk.

How does Risk Rating 2.0 affect properties damaged or destroyed by the Holiday Farm Fire?
If a structure was not completely destroyed and the existing NFIP policy for the structure was not canceled, then there will only be up to an 18% increase in the flood insurance rates each year until the full risk rate premium is reached. If a structure was destroyed to the extent that the existing NFIP policy was cancelled and new policy is applied for the rebuilt structure, then the property will be subject to full risk rates when the new policy is obtained. New policies will be subject to the new rating methodology. All remaining policies renewing on or after April 1, 2022 will be subject to the new rating methodology, but most rates will not increase more than 18% per year until the full risk rate premium under the new methodology is reached. Insurance premium rates are dependent on many factors specific to an individual property.

It is highly recommended that you consult with your insurance agent to determine how Risk Rating 2.0 may affect your property.

More information is available from FEMA at www.fema.gov/flood-insurance/risk-rating.

 

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