According to a new analysis from Porch, a provider of software and services for the home service industry, upwards of three million US homeowners will pay extra for flood insurance under new Federal Emergency Management Agency flood risk rates.
FEMA introduced “Risk Rating 2.0” last month, a new flood risk rating methodology that affects all National Flood Insurance Program customers. Formerly, flood risk was assessed by FEMA and insurers using flood zones. Based on Porch’s analysis, the new method isn’t based on flood zones, but rather on several parameters such as distance from the flood source, the severity and frequency of flooding, and property features such as the cost of rebuilding the property in the event of damage.
Porch points out that as a result of the new system, the cost of flood insurance for 3.3 million homes is about to rise. Although FEMA says the increase will be minor, Porch thinks otherwise.
According to Porch, FEMA estimates that 77 percent of American homeowners with flood insurance will face a price change. Twenty-three percent (23%) will experience a decrease in their price. Premiums will increase by $120 to $240 per year for 11%.
According to the analysis, the move will have the greatest impact on Hawaii and the southern states. In Hawaii, 87 percent of families would be affected, and huge numbers of homeowners will pay extra in places like Texas (86 percent), Mississippi (84 percent), Florida (80 percent), and Louisiana (80 percent).
Flood insurance prices are expected to rise the most in northern states like Connecticut (up to $130 per year) and Vermont (up to $125 per year).
The most significant relative price increases are projected in Florida (15%) and Texas (10%). (up 12 percent ). The states of Alaska and Washington, D.C., are predicted to have the lowest percentage of homeowners who would see their flood insurance premiums rise. Only 14% of Alaskan homeowners can expect a rate increase, while 28% of Washington residents can expect a raise.
According to the analysis, there will be a reduced percentage of homeowners suffering rate hikes in many Midwestern states. According to Porch, 46 percent of homeowners in Michigan will see their rates rise, while 54 percent to 57 percent of homeowners in Nebraska, Indiana, Ohio, Wisconsin, and Illinois will see their rates jump.