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New national flood insurance policy rating system begins Oct. 1

Monthly premiums for National Flood Insurance Program policyholders will be affected starting Oct. 1 as the Federal Emergency Management Agency implements Risk Rate 2.0. The exact financial impact the new rating system will have on property owners within the Highland Lakes will vary, according to FEMA reports and a local insurance agency representative.

Rating system changes begin Oct. 1 for new policyholders. Those with existing policies will not see Risk Rate 2.0 implemented until April 2022. 

Roughly 64 percent of single-family residence policy holders within Marble Falls will see a $0-$10 increase in their monthly premiums. About 18 percent will see an increase between $10 and $50. The remaining 18 percent will see no increase or a decrease in premiums, according to the ZIP Code-Level Premium Change Analysis posted on the FEMA website.

In Horseshoe Bay, about 82 percent of policy holders will see a $0-$10 monthly increase, and only 11 percent will premium decreases. 

Existing laws cap rate increases at 18 percent per year, according to the FEMA website.

The National Flood Insurance Program, which is run by FEMA, is the source for most flood insurance policies across the nation. To mitigate risks and loss, homeowners with properties located in certain areas are required to purchase flood insurance.

For decades, policy rates have been mostly based on a property’s elevation and location on the Flood Insurance Rate Map (FIRM). Once the Risk Rate 2.0 system is implemented, policies will account for new variables, such as flood frequency within an area, type of flooding to which an area is prone, the distance from a property to a water source, and the replacement cost of a home. The upcoming changes were announced this summer.

The new rating system should result in more accurate insurance rates, said Lisa Sultemeier, a customer service representative with Whitman Insurance Agency in Marble Falls. However, it will likely mean higher rates for individuals with properties in areas with high flood risk, such as lakefront locations and those in the floodplain.

“A lot of this is going to be really up in the air because of the different rating factors in the system,” Sultemeier explained. “This is new to us as well, so it’s going to be hard to determine who is saving money and who’s not.” 

The FEMA website boasts that the new Risk Rate 2.0 will be a more equitable solution for policyholders. For example, rates used to be based on the amount of insurance a property owner purchased for each individual structure. The new rating system, however, will consider home replacement costs instead, which are based on home value. This change could lead to lowered premium rates for those who own homes with lower property value, whereas those with higher-valued homes could pay more. 

For a better understanding of how the new rating system will impact monthly premiums, Sultemeier suggests policyholders speak with their insurance providers. 

An interactive map of what areas will be most affected by the new rating system is available on the FEMA website. A summary of the new changes provided by the Congressional Research Service is also available online. 

brigid@thepicayune.com