Puerto Rico: New Federal Flood Insurance Risk Rating 2.0

The Federal Emergency Management Agency (FEMA) is rolling out changes when it comes to flood insurance rates across all states in the country. Today, we will unpack these changes coming to Puerto Rico and how they can impact your flood insurance in the future.

Today, we set sail to another island we have in the U.S., Puerto Rico. Since the U.S. territory itself is sandwiched between the Caribbean Sea and the North Atlantic Ocean, it's very likely to have floods even with a small amount of rain.

Getting flood insurance is one great thing when it comes to protecting your home from all types of flood risk. However, not knowing certain changes and updates for policyholders can drastically impact where you land after any type of flood damage. This is why we always want everyone to be updated to flood map updates on communities, preparedness, and awareness of possible natural disasters like hurricane season and spring runoff, and how certain changes to flood insurance will be impacted. 

Let's talk about the coming changes to the National Flood Insurance Program (NFIP) which is also our friends over Puerto Rico has when it comes to flood insurance options. The NFIP is changing a lot with their new Risk Rating 2.0 and we want to understand how this can impact your flood insurance.

The Risk Rating 2.0 will arrive for FEMA policyholders starting this October 1, 2021.

The NFIP 2.0

The Risk Rating 2.0, or commonly known as NFIP 2.0 as well, is equity in action. This update on the federal flood insurance program itself will allow you to no longer pay more than your fair share when it comes to premiums as this would now be based on the value of your property or home starting this October. 

Property values alone however don't determine your final flood insurance premiums with FEMA and even with private insurers. When it comes to flood insurance, there's a lot of things that come into play and these things are what you should also consider before buying a flood insurance policy. Things like:

• Overall risk of flooding and flood frequencies in the community
• History of flood damage and flood loss
• History and how many flood claims were made in the last 10 years
• Mitigation efforts made on the property. Does it have enough flood openings? Is the lowest floor raised above the base flood elevation level?
• Flood zone designation. Are you in a high-risk flood zone or a low-risk flood zone?

These are just to name a few things that come into play when it comes to flood insurance premium and considering that most of the properties in Puerto Rico are in coastal communities, you want to consider that you have these items on check.

When it comes to the rate changes happening across the country, you're going to see these colors in ranges which represent these changes with flood insurance rates from FEMA. Now, each of these colors represents the good, the bad, and the ugly changes coming to each state.

The Good

The first thing we'll discuss is the good news for Puerto Ricans when it comes to their flood insurance with FEMA. This change will cover 41% or 3,260 of the policies on the island and will be shown as the green portion in the graph.

The good change will come in form of that decrease federal flood insurance rates. The decrease will be up to more than $100 (>$1200 per year). This can really help a lot of people go through FEMA in order to protect their properties from these flood risks due to storm surge and coastal flooding.

The Bad

Now, let's move into the bad things happening to federal flood insurance in Puerto Rico. This will show up as that blue portion. There will be about 57% or 4,524 of the flood policies FEMA has in force.

The bad change is because you're going to start a slight increase in rates in this blue portion. The increase will range from $0 to $10 per month ($0 - $120 per year). Generally, this means that you might not encounter any change at all when it comes to flood rates with FEMA hence that $0 or you can get up to $10 increase starting this October.

The Ugly

Lastly, let's talk about the ugly changes coming to Puerto Rico with the Risk Rating 2.0. These changes will be part of the pink and grey range which takes up a total of 2% of the policies FEMA has in force on the island.

The pink portion will be covering about 1% or 85 of the policies and will get you an increase ranging from $10 to $20 per month ($120 - $240 per year). This is significantly a bigger increase because either way, you're going to start to pay for higher flood insurance from FEMA.

The grey portion on the other hand will be the uglier change. This will cover another 1% or 110 policies. The increase this time around will be drastic for those impacted since the increase will be more than $20 per month (>$240 per year). This means that you can go up to a $100 increase on your FEMA rates starting this October or maybe even more.

You can see the full graph of these changes below:

When Will It Happen?

Now, the date when you can adopt this program really depends if you're doing a renewal or if it's a new business policy. You see, you can expect these changes to start on October 1st and you're going to adapt to these rate changes if you're buying flood insurance from FEMA on or after that date. 

On the other hand, if you're doing a renewal with FEMA after that date then you don't have to take in these new rate changes until April 1st, 2022.

So, you want to be very ready for this. We've been talking about this since last year since basically the NFIP is already 30 years old already and is in need of this change. 

If you have questions on these upcoming changes, what are your flood insurance options in Puerto Rico, or anything about flood, reach out to us through the links below. You can also watch this on our YouTube channel.

Remember, we have an educational background in flood mitigation and we want to help you understand flood risks through education and awareness in flood insurance and preparedness.