Sharing the burden? Why you could pay more for flood insurance than someone in a flood-prone area

FEMA changes the way it calculates flood insurance, skipping renewal could cost you

HOUSTON – We are less than a month away from the start of hurricane season--which means it is a good time to check your flood insurance policy. FEMA rates are changing and make sure you don’t let it lapse.

You may think your premium is high now, but Investigator Amy Davis has a warning about how much you may have to pay if you skip a year.

Homeowners in flood-prone areas could pay less for insurance

We know Houston is prone to flooding. Historically, if you purchased a home in a flood zone (high-risk area) you knew your flood insurance would cost more than if you lived in an area with lower flood risk. Forget all that.

“There are some weird things that they’re looking at now that have nothing to do with what zone you live in,” said Leash Yu.

Yu is the president of Agency Yu, an insurance brokerage at West University. Yu says FEMA now considers how much it will cost to rebuild your home when deciding how much to charge you for flood insurance, even though the maximum payout is $250,000.

Why you may pay a lot more for FEMA flood insurance if you decide to let the policy lapse. (Copyright 2023 by KPRC Click2Houston - All rights reserved.)

“The way I look at it that is FEMA’s way of equalizing the cost and spreading it across everybody else.. because they think that somebody that lives in a $2 million home should be able to afford more of the premium than somebody who lives in a $250,000 home.”

It means FEMA raised rates for many homes that have never flooded and lowered rates for homes that have.

LOWER RATES: Galveston Island

You don’t get more high-risk coverage for flooding than Galveston Island, but Yu found flood insurance rates there decreased an average of 41%.

One home’s rate was $10,579 a year, and it’s now just over $1,400.

HIGHER RATES: Woodland Heights

Compare that with homes in Woodland Heights that are not high risk where rates increased an average of 249%.

The average homeowner here paid $527 dollars a year. The new rate is about $2,000 a year.

But here’s the thing, you won’t see that increase all at once. FEMA will raise your premium by 18% every year as long as there is no disruption to your policy until you finally reach that new $2,000 rate.

What are Glide Path insurance rates?

And there’s a term for that. They call it the glide path. You know you can glide into the new rating system.

But miss a payment or fail to renew your policy on time, your rate will see that huge increase all at once when you start your policy again.

Why you may pay a lot more for FEMA flood insurance if you decide to let the policy lapse. (Copyright 2023 by KPRC Click2Houston - All rights reserved.)

“You immediately have to experience the new rate. And by the way, that’s happening almost every single day. We get phone calls, ‘Oh my gosh, I forgot to pay.’”

If you want to know what your premium would be if you had to start a new policy, you can call any insurance broker and ask for the price of a new flood policy on your home.

You can transfer flood policy if you sell your home

You should also know that if you are buying a new home you can ask the seller to transfer their flood policy to you. That will allow you to be grandfathered into the lower rate with an 18% increase each year, instead of starting at what may be a super high new premium.

RELATED: What to look for when shopping for flood insurance

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Passionate consumer advocate, mom of 3, addicted to coffee, hairspray and pastries.