American Eagle Insurance Blog
Insurance rates are going to rise in flood-prone areas that are under the plan of the current administration. With that, a lot of people seem to be bombarded with this thought as they are not fully aware of the increasing factors of insurance rates.
The following are possible reasons why insurance rates in flood-prone areas are predicted to increase.
Risk of Customers
FEMA states on a document at the 17th of October 2018 that there is a new risk rating system for countries along the Southern Atlantic and Gulf Coast, from North Carolina to Texas and that new rates would start to effect in 2020. Their spokeswoman, Maurstad, said that there are sections of documents that were no longer accurate. They also stated that their new system would determine the customer’s flood risk by including multiple, logical rating variables. She mentioned that those rating variables are the risk of a building to be flooded, what type of flood, and how much is it cost to rebuild a home.
FEMA also claimed that they didn’t know yet what the new system effects would be on premiums. Rates mostly increase in neighborhoods that have higher flooding risks which could damage their property values on that area.
Additionally, rising sea levels have increased the tendencies of coastal flooding along the past few decades that deemed considered as the most economically damaging impact of climate change for many seaside locations.
Insurance providers usually offer added initiatives to those who have higher flood risks, and that means increased rates. Increasing rates also serve as a warning to potential buyers about the flooding tendencies of a specific location.
How Rates Change
The two factors mentioned above, risk of customers and important initiatives, likely have a high impact on rates- whether it decreases or increases. However, the law written on flood insurance provides the authority to change the way they set insurance rates without the Congress’ action.
Flood insurance rates in most flood-prone areas are predicted to increase since the trump administration shows too much interest in it. There is also a new risk rating system regarding which location has higher flooding tendencies than the other.
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