As hurricane season approaches FEMA discusses what will influence flood insurance premiums

La. Department of Insurance held a hurricane summit on Wednesday
Published: Apr. 27, 2022 at 7:36 PM CDT
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Flood insurance is a must-have for homeowners along the coast. Now, most policyholders are...
Flood insurance is a must-have for homeowners along the coast. Now, most policyholders are going to see their premiums cost more thanks to a new federal system.(David Bollinger)

NEW ORLEANS (WVUE) - A FEMA representative gave specifics about what will influence flood insurance premiums under its new methodology Risk Rating 2.0 which took effect this month for existing policyholders and last October for new policies during a Louisiana Department of Insurance summit on the soon-to-begin hurricane season.

The damage Hurricane Ida caused eight months ago in southeast Louisiana is still palpable in some areas and the insurance department says now is the time for people to get familiar with their insurance policies for the new hurricane season.

“We’re getting out and trying to help people understand just a little bit of their policy,” said Ron Henderson, Deputy Commissioner of the Insurance Department’s Officer of Consumer Advocacy.

He and others were part of the hurricane summit.

“We want to make sure people understand their rights and what they have in those policies,” said Henderson.

This year’s hurricane season will kick off as many people are concerned about new flood insurance rates.

FEMA’s Gilbert Giron gave a lengthy presentation on Risk Rating 2.0 during the hurricane summit. He said things like structures’ replacement cost are taken into account when determining premiums.

“Under Risk Rating 2.0 we will no longer be using actual cash value, every policy in our book of business will be rated using replacement cost value,” said Giron.

And the materials used to construct homes.

“The science has shown that masonry products just fare better than wood-type frame structures. So if you have a structure that is built with masonry product and we’re talking about solid rock, we’re not talking about a brick veneer, we’re talking about a solid rock product you’re going to receive a reduced flood insurance premium,” said Giron.

And in terms of rates, FEMA says whether a home is single-story or two-story is a factor.

“If you have a single-story, single-family home your insurance is probably going to be a little bit higher, now if you have multiple floors it’s very unlikely that the higher floors above the ground floor would experience flood damage, so your flood insurance premium could be a little bit lower,” said Giron.

He showed an example of the new declarations page policyholders receive under Risk Rating 2.0.

“As you can see, we have the building premium and content premium right at the top. We will no longer have a product that will tie both the building and the content premium into a single policy. They have to be bought separately and they show on the premium as such, on the declaration page as such. As you can see there’s increase of compliance charge and then any mitigation discount loss will be shown here as well as any CRS, the Community Rating System discount and so for the full-risk premium we have a set number of $1,200,” said Giron.

FEMA says with Risk Rating 2.0. it can incorporate more flood risk variables including distance to water sources like rivers, oceans and the coast.

The agency says property can assign their existing flood policy to prospective buyers at closing.

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