My Flood Insurance Went Up 34%. Is That Even Allowed?

Short answer: It depends on which kind of flood policy you have. If it's an NFIP policy, the premium on most renewing homes can only rise 18% a year, so a 34% jump means something besides the rate changed. If it's a private flood policy, there is no federal cap: the carrier can re-price at renewal, and a 34% increase is allowed. Either way, you have more options than you think.

Step one: find out which policy you have

Pull up your declarations page. An NFIP policy says National Flood Insurance Program on it, even when a private company services it as a Write Your Own carrier. If your declarations page doesn't mention the NFIP, you have a private flood policy, and the 18% cap doesn't apply to you.

Also check whether it's your premium that went up or your mortgage payment. If your payment jumped, your lender may be collecting for an escrow shortage plus the new premium. Compare the premium on your declarations page, not just the payment.

If you have an NFIP policy

The 18% cap limits how much the premium can rise when an existing NFIP policy renews. It doesn't cover fees and surcharges added on top, like the Federal Policy Fee and the HFIAA surcharge. Here is how the 18% cap works in more detail.

5 reasons an NFIP bill jumps more than 18%

1. It's not really a renewal. If the policy lapsed and was rewritten, or a new owner bought a new policy instead of taking over the seller's, you can lose the old rate history and start at full risk-based pricing.
2. Your coverage went up. A higher building limit, often because the replacement cost was updated or the lender asked for more, raises the premium on top of any rate change.
3. The home isn't on file as your primary residence. Non-primary homes pay a much larger HFIAA surcharge and can rise faster each year. If you live there, make sure the insurer has your proof.
4. A discount fell off. Community discounts and other credits can change when your community's status changes.
5. The property was rated wrong. Foundation type, first floor height and replacement cost errors are common, and they're fixable.

If you have a private flood policy

The NFIP's 18% cap doesn't bind private carriers. Each renewal is priced on the carrier's own rates and underwriting, so a big jump is legal. It's also not the norm. When we reviewed 36 private flood renewals in Indiana, the median increase was about 4%, but 12 of the 36 rose more than 18%.

Why a private flood renewal jumps

• The carrier raised rates across the board. This hits every policyholder with that company, not just you, and it's the most common cause of a big private increase.
• There was a claim on the property. Private carriers price claims history into renewals.
• Your coverage or replacement cost went up. Same as the NFIP: more coverage costs more.
• The carrier is pulling back in your area. A steep increase can come before a non-renewal. Here are the common reasons private flood policies get canceled.

The good news: you aren't locked in. A private policy can be re-shopped with other private carriers or compared against the NFIP at every renewal. One caution before you switch back to the NFIP: you'll come in at the full risk-based rate, not whatever discounted rate you may have had before you left.

What to do this week

• Pull last year's and this year's declarations pages and compare premium, fees, coverage limits and rating details line by line.
• NFIP: confirm your primary residence status is on file and ask whether the policy was renewed or rewritten.
• Private: ask what drove the increase: a carrier rate change, a claim, or a coverage change.
• Quote it both ways. We place NFIP and private flood, so we can show you how the same home prices on each side.
• Start before your renewal date. NFIP policies have a 30 day waiting period and most private policies wait 3 to 15 days, so shopping early keeps you from a gap in coverage.

A note on deductibles

On an NFIP policy, raising your deductible saves less than people think. Going from a $1,000 to a $5,000 deductible typically saves about 2.5%, roughly $25 on a $1,000 premium for $4,000 more out of pocket. Private flood is different: once you go above a $2,000 deductible, the savings can be meaningful. It's worth asking for quotes at more than one deductible.

Not sure what changed? Send us your policy for a review or call (205) 451-4294. We'll tell you why it went up and quote both NFIP and private.

Frequently asked questions

Can flood insurance go up more than 18% a year?

Yes, in two ways. On an NFIP policy, the premium on most renewing homes can't rise more than 18% a year, but your total bill can, because fees, surcharges, coverage increases and rewritten policies sit outside the cap. On a private flood policy, there is no cap at all.

Does the 18% cap apply to private flood insurance?

No. The cap only applies to NFIP policies. Private carriers set their own renewal pricing. In our review of 36 Indiana private renewals, the median increase was about 4%, but a third rose more than 18%.

Why did my flood insurance go up so much?

For NFIP policies, the most common reasons are a rewritten or new policy, higher coverage limits, a home not on file as a primary residence, a lost discount or a rating error. For private policies, it's usually a carrier-wide rate increase, a claim, or a coverage change. An escrow shortage can also make your mortgage payment jump even when the premium didn't.

Should I switch from private flood back to the NFIP if my rate jumped?

Maybe, but compare first. Returning to the NFIP means paying the full risk-based rate, and other private carriers may beat both options. Quote it both ways before you decide.