Q&A of the Day – Florida’s Record Flood Insurance Price Hikes
Each day I feature a listener question sent by one of these methods.
Email: brianmudd@iheartmedia.com
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Today’s Entry: Hi Brian, where can I go to look up the flood price information you were talking about to see what I might be in store for? My zip code is 33408. Also, what do you think about private flood insurance? Is that a good option?
Bottom Line: In answer to your first question. You only need to go to my daily blog. If you hear me talk about something on-air, you’ll find those stories on The Brian Mudd Show blog daily – with linked source material. On Monday I covered this in my news from around the state and on Tuesday in my Top 3 Takeaways – both of those stories include the link to the map where you’re able to see what’s happening by zip code. Here’s a quick refresh. New dynamic flood insurance policy pricing, soon to be implemented by FEMA, will lead to about 80% of South Floridians seeing price hikes with approximately 20% of property owners seeing decreases according to a new analysis based on the pricing. Pricing will be based on a property's proximity to the ocean, historic rainfall levels and the estimated cost of rebuilding the property. And where increases are most being felt, there will most certainly be cases of sticker shock. The largest increase of all is a greater than threefold increase in cost in the zip code 33469 – which encompasses parts of Jupiter and Tequesta. The average flood policy in that zip code currently costs $780 annually but will be $3,449 going forward. With an annual 18% cap on FEMA’s flood insurance policies, many South Floridians can expect to see maximum increases for the foreseeable future. With new policies reflecting the full effect of the changes immediately, those relocating within the most impacted communities, which are commonly eastern communities, should be mindful. With that out of the way, let’s get down to answering today’s questions.
First, the increase you can expect to see in your zip code - 33408, which encompasses parts of North Palm Beach, Juno Beach, Juno Ridge and Palm Beach Gardens – is a lot. The average in force policy in that zip currently runs $884. Going forward the average will be $2,406, a 272% average increase. Sorry to be the bearer of bad news. As for the private flood insurance consideration, there’s a lot to consider. Starting with whether you have a choice. In thinking about whether you should consider a private flood insurance plan, you should ask yourself these two questions. Are you carrying flood insurance, and the level of coverage you’re carrying, by choice or due to the mandate of a mortgage company? What’s the most important consideration for you, the price of the policy or the reliability of payouts in a potential claim situation?
The private flood insurance policy market is growing, however it’s still a tiny fraction of the overall flood insurance market. Entering this year 95% of flood policies were government-backed plans with just under 5% underwritten by private insurers. That potentially matters for multiple reasons. Before diving into those considerations though, let’s talk about whether you have a choice. If you have a mortgage on your property, or will purchase a property with a mortgage, is having a flood insurance policy a requirement of establishing or maintaining that mortgage? If the answer is yes, the first and most important question you need to have answered before considering a private flood insurance option is whether it would meet the requirements of the lender. Historically, most federally backed mortgages (Fannie Mae, Freddie Mac & FHA), which account for about three-quarters of the mortgage market, have mandated flood insurance policies underwritten through the National Flood Insurance Program. That said, starting in 2019, the Flood Insurance Reform Act went into effect mandating that mortgage companies accept flood insurance coverage that met minimum federal requirements. If you’re considering a private policy with a mortgage in place, you’ll want to run everything through your mortgage company first. At worst, you might purchase a private policy only to be forced into maintaining coverage through the NFIP as well. There are 33 entities currently licensed in Florida to underwrite primary flood policies – so the options for you may be many. As for the consideration to be paid for the reliability of payouts...
The state of Florida has increased accountability standards on private insurance companies as recently as in the just concluded legislative session. That said, with regard to flood policies, with private insurers historically representing a small swath of the flood insurance market, the track record for mass claim events is very limited. Conversely, the federal flood insurance program is backed by the federal government and thus is reliable in paying out claims regardless of the scale of the event. That doesn’t mean the right answer is to simply pay whatever they say you have to pay to stay with their plan. It’s just a little extra food for thought in the larger conversation. Hopefully this has been helpful and best wishes to all South Floridians. When it comes to property insurance we need it.