FEMA's New Flood Insurance Policy to Take Effect in October

Next month, October of 2021, a new flood insurance policy will go into effect which will have major implications for all homeowners and buyers of homes for sale in the Florida Keys, particularly waterfront homes in the Keys. The new model is part of FEMA’s National Flood Insurance Premium Risk Rating 2.0 and will be a big change from the current model.

Previously, flood maps and Base Flood Elevation Certificate data was used to determine a homeowner’s policy premium. Under the new system, however, this data will not be used. Instead, FEMA will use internal data sets to determine premiums using construction type, foundation type, first floor elevation levels, and replacement cost value. As of now, there is no appeals process under the new system. This has many homeowners feeling dubious about the vague systems that will be utilized.

FEMA has issued statements claiming that 96% of policyholders will see a decrease in their premiums of around $20 per month. Many owners of Florida Keys real estate, however, are convinced that this will not apply to coastal areas like the Keys. Even FEMA has estimated an approximate $240 annual increase in the Keys. Local group, Fair Insurance Rates in Monroe (FIRM), has run computer model simulations that see even more dramatic increases for policyholders in the Keys due to their coastal location and flood risk. FIRM’s increase estimation is thousands more than FEMA. With Florida Keys policyholders already paying typically thousands more annually than the national average of $800, these increases could be calamitous  for homeowners.  The good news, however, is that increases are capped at the national level. According to national statutes, annual increases cannot be more than 18% for primary homes, and 25% for second homes and commercial properties.

The new insurance rates will go into effect on October 1, 2021 for new policies, and April 1, 2022 for existing customer renewals. Many homeowners and government representatives are continuing to fight for a postponement or re-evaluation of the new policy. As the October 1 date grows closer we will have to wait and see if there is any update!