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What to Know About Risk Rating 2.0 Flood Insurance

What to Know About Risk Rating 2.0 Flood Insurance

April 5, 2022 By Crescent City Living

The face of flood insurance in New Orleans is changing with the implementation of Risk Rating 2.0. Gone are the days of that preferred X flood zone meaning your premiums would be low because everything has shifted with this new program.

What is Risk Rating 2.0?

According to FEMA, Risk Rating 2.0 will set flood insurance rates that are fairer and ensure rate increases and decreases are both equitable. In reality, FEMA has been less than forthcoming with the data being used to set new rates. All of those years of flood maps have been tossed out of the window and now every single property is priced individually rather than by zone location.

Properties near open water are going to take the biggest hits if there is not a federal levee between the water and the home.

Don’t let your insurance lapse

Historically, mortgage companies did not require home buyers to purchase flood insurance if the house was in a preferred zone. Of course, we have ALWAYS recommended that everyone carry flood because we’ve seen too many places that “never flooded” end up taking on water.

Under Risk Rating 2.0 if a previously preferred zone policy is allowed to lapse, the premium to put it back into place will be priced at the current actuarial price – which could be hundreds or thousands of dollars more than you’re currently paying.

We are already seeing homes in X, B, and C zones with quotes for flood insurance causing potential buyers to walk away from them.

While your preferred zone rates can increase up to 18% per year, keeping it in place is still more cost-effective than losing a buyer because you let the policy lapse and the new premiums are too expensive.

A note about Risk Rating 2.0 to buyers

While it’s still possible to assume an existing affordable flood insurance policy, we encourage you to ask your insurance agent what the ultimate Risk Rating 2.0 premium will be. You don’t want to buy a house today only to find that you’ve been priced out of it with a few years of 18% increases.


Need to know more about buying a home in New Orleans? Start here.

Filed Under: Buyers, Home Owners Tagged With: insurance

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