The new flood insurance risk rating system is changing things for buyers.
FEMA’s recently implemented a new risk rating system called Risk Rating 2.0. As of October 1, 2021, new policies coming into effect are based on this system. FEMA now has the capability and tools to address rating disparities by incorporating more flood risk variables. The new risk variables include flood frequency, multiple flood types (river overflow, storm surge, coastal erosion, heavy rainfall), distance to the water source, and property characteristics such as elevation and the cost to rebuild.
As of April 1, 2022, all policies being renewed are subject to the new rating methodology. We’re already seeing changes to the rates we’re getting here in Monroe County due to the new system. For example, a property in Key Colony Beach was averaging about a $1,000 flood insurance premium per year. When a new buyer bought it, they got a new quote and now have to pay almost $5,000 per year.
Buyers need to find out if the seller has flood insurance because it’s one of the few insurance policies a buyer can assume from the seller. There are a few extra documents to go over at closing to make that happen, but it can save you a few thousand dollars per year. This rating system change is something to be aware of when looking for a property to purchase. Of course, it’s out of our control since it comes from FEMA, and we’re still learning more about it.
We’ll keep you posted about the new system and any changes that occur. If you want to read more about Risk Rating 2.0, here is FEMA’s page all about it.
Contact your insurance agent if you have any questions about Risk Rating 2.0. Reach out to us via phone or email if you have questions about how it relates to your real estate plans or if you need anything else. We will always do our best to help.