What is the Risk Rating 2.0: Equity in Action?
On October 1, 2021, FEMA began phasing in a new flood insurance pricing system called Risk Rating 2.0: Equity in Action. These changes apply to new flood insurance policies. Most existing policies are not going to be affected until after April 1, 2022. Existing policy holders can take advantage of any premium decreases at the time of their renewal beginning October 1, 2021.
NAR policy supports Risk Rating 2.0: Equity in Action, which prices flood insurance for each home individually rather than by flood zone. FEMA had not updated its rating system in 50 years. By adopting modern insurance industry technologies, standards and practices, FEMA is able to rate more precisely and accurately by using more flood risk factors and property-specific characteristics, including each building’s unique elevation, distance to water and cost to rebuild. The new rating system only affects NFIP risk-based rates and does not change flood mapping or insurance requirements. Buyers may assume seller policies, and any increases cannot exceed 18 percent per year by law.
Where Can I Find More Information About FEMA’s Risk Rating 2.0: Equity in Action?
As FEMA implements the new pricing system, some owners and buyers may have questions about flood insurance rate changes. Real estate agents and brokers are an information source, not flood or insurance experts. You can provide the facts that every home in America has some flood risk, and a flood insurance rate quote from a licensed insurance professional can help your clients make better informed decisions. You can also be ready with contact information for a few NFIP and private market insurance agents, licensed surveyors/engineers, and other flood risk professionals (e.g., your local government floodplain manager) who can offer risk assessment and mitigation resources and answer property-specific questions.
NAR has developed the following comprehensive packet of educational information for NAR members to talk with customers about Risk Rating 2.0:
NAR Myth Buster
FEMA-NAR Flyer for Homeowners
NAR Frequently Asked Questions (FAQs)
NAR Member Legal Guidance
NAR-FEMA Toolkit: Disaster Preparedness
Video: NAR-FEMA Townhall
Video: Flood Insurance & Disclosures: What You Need to Know Now
What You Should Know About FEMA's Risk Rating 2.0 (REALTOR® Magazine)
To learn more about Risk Rating 2.0: Equity in Action, FEMA has a dedicated webpage with comprehensive consumer resources.