New flood insurance rules: What Long Islanders need to know

Long Island homeowners whose flood insurance policies renew on or after April 1 will be subject to the National Flood Insurance Program’s new system for setting prices. Three in four local policyholders are expected to see their prices rise, while a smaller contingent are set to qualify for big discounts.  

The Congressional Research Service has called Risk Rating 2.0 “the biggest change to the way the NFIP calculates flood insurance premiums” since the program’s inception in 1968. Local flood insurance experts expect the changes to be a mixed bag for Long Islanders, with South Shore homeowners facing the biggest hikes. The change took effect for homeowners buying a new policy in October. 

There are roughly 77,000 federal flood insurance policies in effect on Long Island, including those for commercial properties, FEMA data shows.

“You’re going to have a few people who are going to be relatively happy because they may see their rating go down, but then you are going to have a lot of really upset people,” said David Clausen, CEO of Coastal Insurance Solutions in Rocky Point.

Here’s what you need to know about Risk Rating 2.0:

The new prices will take into account factors such as distance to bodies of water, flood frequency, elevation and the cost to rebuild a home. High-priced homes that are more expensive to rebuild face higher rates. The new system also considers risk from other types of floods beyond coastal surges, such as excessive rainfall. Flood zones are still used to determine whether homeowners are required to buy flood insurance to qualify for federally backed mortgages.

As consumers receive their new rates, it’s important they and their insurance agents check the data FEMA has about their houses to ensure it’s accurate, said Aaron Stein, president of insurance agency Norton & Siegel in Babylon. 

If there’s “information on the wrong house or wrong policy or if anybody thinks their rate went up too much, there could definitely be mistakes,” Stein said. “We’ve seen that.” 

In November, the federal agency told Newsday the average of new quotes on Long Island is $1,600 a year, and more than half of policyholders will pay less than $1,000. The 5% of homes deemed the highest risk for costly claims will pay $5,000 or more, a spokeswoman said at the time. The agency declined to provide a full breakdown of what Long Islanders will pay under the new system. The maximum premium allowed is $12,125.

FEMA noted in January that under the old system, no homeowners would have seen their rates decrease this year and policyholders would have seen prices go up regardless of their risk level. By changing the way it calculates risk, it was able to lower prices for about one-quarter of Long Island  homeowners.

Long Beach has the largest number of homes with flood policies on the Island, at 5,217. About one-third of policyholders there will see a discount of at least $120 a year under the new system.  You can search how premiums are changing in your ZIP code in the table below.  

Homebuyers in that situation have options, FEMA said. For instance, sellers can still transfer discounts to the new owner “by assigning their flood insurance policy when their property changes ownership,” the agency said. A new owner can also access the gradual increases by providing FEMA with information about the prior policy, including the policy number.  If there is not an existing policy, new policyholders must pay the full risk rate.   

“There are numerous sources of potential flood damage in the future,” Reed said. “[The] sea level is rising. Storm surge will become higher in the strongest storms and storms are producing more rainfall in a warming climate.”

Reed has co-authored research in the past few years that aims to measure how climate change has contributed to higher rainfall totals in individual storms, such as Hurricane Florence, which hit the Carolinas in 2018. He hopes to expand that focus to see how the area or depth of flooding is affected by climate change, so policymakers could better plan for future storms.

“We're trying to create a framework that can start to ... provide a glimpse of what Sandy or Irene 2.0 might look like under different warming levels in the future, to allow the government and individual communities to develop resiliency plans,” Reed said.

By Jonathan LaMantia

jonathan.lamantia@newsday.com@jonlamantia

Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.