RALEIGH, N.C. (WNCN) – Those who pay for flood insurance in North Carolina are about to see their rates go down. Changes go into effect Oct. 1, but most people won’t see it reflected in their premiums until April when federal flood insurance policies start renewing.
Flood zones are determined by the history of flooding in an area. Then, the flood zone is rated according to the annual probability of flooding.
FEMA calculates every inch of water in a home does $27,000 worth of damage, so that cost adds up as water rises.
For decades, federally funded flood insurance rates have been calculated based on an outdated system with an old understanding of flood risk.
After years of work, FEMA has now updated its rating methodology.
“The data allows FEMA to move toward pricing by home versus pricing by entire comminutes,” said Craig Fugate, the former head of FEMA. The changes to the program were being developed while he was head of that agency.
Right now, many homeowners are subsidizing flood insurance for people who live in higher-risk areas.
“This was about the equity in the program, about fairness, and about people paying what their risk was,” Fugate said.
Currently, about 140,000 people have flood insurance policies here in North Carolina.
Under the changes, called Risk 2.0, about a third of flood insurance policyholders will see premiums drop under the new ratings.
“Some will see tens of dollars a month, some are hundreds of dollars,” Fugate said. “Other folks will see their rates stay the same.”
For those whose rates will change, the difference will be minimal.
“About 60 percent of policies will go up $10 a month or $120 a year,” Fugate said.
FEMA found many of those paying too much are lower-income individuals who live in older homes.
Despite the lower rates, Fugate said no one will see refunds if they overpaid.
“Like a lot of insurance programs, as premiums came in, money was paid out,” he said. “In fact, FEMA had to borrow money from taxpayers to pay for previous floods.
The changes in the rates also reward mitigation.
For example, policyholders can reduce their premiums if they do things like elevating their utilities or installing flood openings in their dwellings.