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On Your Side: FEMA overhauls flood insurance rates, the best time to buy new policy

Updated: May. 10, 2021 at 9:04 PM CDT
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BIRMINGHAM, Ala. (WBRC) - Flooding is top of mind for residents across the Birmingham area following last week’s torrential rainfall. The difficult reality for many - homeowner’s insurance policies do not cover flooding.

Most flood insurance policies are administered through FEMA’s National Flood Insurance Program, or NFIP. The program will undergo sweeping changes in October titled Risk Rating 2.0: Equity in Action.

The new system will take into account the size and value of a home versus elevation maps used to set flood insurance rates for decades.

“To provide more equity, FEMA now has the capability and tools to address rating disparities by incorporating more flood risk variables”, FEMA stated in a news release. “These include flood frequency, multiple flood types—river overflow, storm surge, coastal erosion and heavy rainfall—distance to a water source and property characteristics such as elevation and the cost to rebuild.”

While 21% of Alabamians insured through this program will see a rate drop, the majority will see a modest increase, up to $10 a month. Less than 3% will see increases of more than $20 a month.

It’s a necessary change to keep the NFIP running after operating in the red for years. In 2019, the program was carrying upwards of $40 billion of debt. In 2020, the Government Accountability Office listed the NFIP as high-risk due to premium rates not fully reflecting the flood risks of its insured properties.

If you’re considering flood insurance through the NFIP, purchasing a policy before October could save you money.

“I would not hesitate to buy it, in fact—it’s prudent to buy it before those changes are made, and probably be protected from those changes in large part through the grandfathering provisions that are in the existing program,” stated Jim Donelon, Louisiana’s Insurance Commissioner.

If you live in a city or county involved in the NFIP’s Community Rating System or CRS, policy holders could benefit from additional savings. Those local communities include Birmingham, Decatur, Homewood, Hoover, Tuscaloosa, and Pell City.

Experts remind consumers that the NFIP has set claim limits which may not cover some items like living expenses, which may be covered by a private insurer.

When determining whether to purchase flood insurance through the NFIP or private insurance, it’s important to know:

  • the actual cash value of the coverage
  • whether it covers alternative living expenses
  • if debris removal is covered
  • the waiting period before a claim is fulfilled
  • the policy’s rebuild limit
  • whether the insurer can cancel the policy

It’s important to note, those who have properties outside a designated high-risk flood zone can still obtain insurance through the NFIP or through private insurance.

List of NFIP providers: https://nfipservices.floodsmart.gov/wyo-program-list

Birmingham residents who have questions about the National Flood Insurance Program can contact the city’s Hazard Mitigation Services at 205-254-2479.

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