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What to expect when flood insurance premiums change on Oct. 1

FEMA flood insurance
Posted at 5:25 AM, Oct 01, 2021

The Federal Emergency Management Agency's historic recalculation of flood insurance premiums will go into effect on Oct. 1. That means around 5-million policyholders nationwide will see changes in the coming year.

"Beginning Oct. 1, FEMA’s National Flood Insurance Program (NFIP) will begin to offer more equitable and risk-informed rates," said FEMA.

FEMA's Risk Rating 2.0 has been described by supporters as a positive. Supporters say flood insurance premiums will now accurately reflect the real cost of flooding.

RELATED: As FEMA changes flood insurance rates, St. Pete agent anticipates 'massive' increases

New policies will be sold using the new methodology, and according to FEMA, some existing policyholders may be eligible for premium decreases when their policy renews.

FEMA states on its website that due to the far-reaching economic impacts of COVID-19, the agency will take a phased approach to roll out the new rates:

  • Beginning Oct. 1, 2021:
    • Existing National Flood Insurance Program policyholders will be able to take advantage of decreases at the time of the policy’s renewal.
    • New policies will be subject to the new pricing methodology, which reflects a property’s full risk rate.
  • Beginning, April 1, 2022:
    • All remaining policies will be written under the new pricing plan at the time of renewal allowing these policyholders extra time to prepare.

“The NFIP’s new rating methodology is long overdue since it hasn’t been updated in more than 40 years, Now is the right time to modernize how risk is identified, priced, and communicated. By doing so we empower policyholders to make informed decisions to protect their homes and businesses from life-changing flooding events that will strike in the months and years ahead due to climate change," said David Maurstad, a senior executive of the National Flood Insurance Program.

RELATED: Flood insurance rates set to change as FEMA revamps program


The new methodology considers the cost to rebuild along with several other flood variables to determine a property’s true flood risk.

Under the legacy pricing system, every policyholder would have seen rate increases now and into the future. Beginning Oct. 1, about 23% -- or more than 1 million -- policyholders will see a decrease in their premium at the time of their policy’s renewal.

These policyholders with older pre-Flood Insurance Rate Map homes have some of the highest rates in the nation under the current rating methodology.


While all this flooding may have you thinking about flood insurance, Congress is thinking about it for other reasons. The National Flood Insurance Program is set to expire on Oct. 1.

While Congress is expected to extend the program, the bigger impact on your life may be the changes FEMA wants to make to flood insurance policies, changes that will likely impact rates.

Currently, policies are based on a home's elevation and whether it has a 1% annual chance of flooding.

Starting Oct. 1, factors such as the history of flooding, frequency of heavy rainfall, as well proximity to a water source, will be factored in.

The numbers mean what you pay will be changing. FEMA estimates around 73% of current policyholders will pay between $1-$20 more per month

It's expected 4% of existing policyholders will see price hikes of more than $20 a month. But FEMA also says around 23% of flood insurance plans will be cheaper, an acknowledgment that some Americans have been paying too much for years.

"It all depends on where you happen to be," Dr. Ed Kearns says.

Kearns runs which allows anyone to type in their address and see their own flood risk.

He says while FEMA's willingness to change is important, more climate change risks should be factored in.

“I'd really like to see how climate change is impacting those heavy rainfall events," Kearns said.

The reality, he says, is that some areas will be hit harder than others with floods in the coming years and Americans need to be insured and prepared to pay more.

"If you are living in a home that is on a grade slab and next to the ocean, or a low-lying area you should expect to pay your fair share.”

New policies will see rates change next month, current policyholders will see those changes next April.

If you're someone who wants flood insurance but can't afford it, keep an eye on Congress. A proposal to create new subsidies is currently included in the proposed multi-trillion-dollar spending bill.