Coastal Mississippi is a beautiful place to live, with its stunning beaches and proximity to the Gulf of Mexico. However, with that beauty comes a real risk of flooding. This is why the National Flood Insurance Program (NFIP) is so important for home buyers and owners in the area. In this article, we will explore everything you need to know about the NFIP and how it affects those who live in coastal Mississippi to include the transition of this program to “Flood 2.0”
What is the National Flood Insurance Program?
The National Flood Insurance Program is a federal program that provides insurance to homeowners, renters, and businesses in high-risk flood zones. It was created in 1968 in response to the increasing number of flood-related disasters across the country. The program is managed by the Federal Emergency Management Agency (FEMA) and offers flood insurance policies to eligible individuals and businesses.
How does it work?
Homeowners and business owners in high-risk flood zones can purchase flood insurance policies through the NFIP. These policies cover both the building and its contents, up to certain limits (the current limit for a residential home is 250k for the building and 100k for the contents). The cost of the policy depends on several factors, including the level of flood risk in the area and the value of the property.
In addition to providing insurance, the NFIP also works to reduce the risk of flooding through measures such as floodplain mapping and the implementation community rebates for increased building codes and standards.
Why is it important for home buyers and owners in coastal Mississippi?
Coastal Mississippi is particularly vulnerable to flooding due to its location on the Gulf of Mexico. Hurricane season, which runs from June to November, can bring intense storms and heavy rainfall that can lead to devastating flooding. Without flood insurance, homeowners and business owners in the area would be at risk of significant financial loss in the event of a flood.
Additionally, many lenders require homeowners in high-risk flood zones to have flood insurance as a condition of their mortgage. This means that if you are planning to buy a home in coastal Mississippi, you will likely need to purchase flood insurance in order to secure financing.
What are some important things to know about purchasing flood insurance in coastal Mississippi?
If you are considering purchasing a home in coastal Mississippi, it is important to understand the flood risk in the area and the cost of flood insurance. Also note that there is typically a 30-day waiting period before flood insurance coverage takes effect. This means that if a storm is approaching, it may be too late to purchase flood insurance to protect your property.
GET SMART ON FLOOD 2.0 and find a reputable Insurance broker to educate you. This program is in transition and therefore continually changing, therefore it is imperative to understand your coverage and the program.
What is Flood 2.0?
As of October 1, 2021, FEMA has begun to transition to Risk Rating 2.0, which is a new system for determining flood insurance premiums. This new system is supposed to take more detailed information about the risk of flooding for individual properties, rather than relying solely on the broader flood zone designation. In addition, the increase of premiums was needed to slowly make up for the $20.5 Billon deficit this program has accumulated over the past few decades and to encourage better and more enforced building codes for the future.
Key Points:
-If you buy a new home, you will automatically get quoted with the Risk Rating 2.0. This rating no longer considers your flood zone but rather your elevation certificate.
-According to Lemon Mohler Insurance, new flood policy premiums are averaging from $2,000 to $10,000 a year.
-Current homeowners may see a decrease in their premiums (approx. 16% of MS policy owners), however most will see an increase. Currently policies are only allowed to increase more than 18% per year. They will continue to increase 18% until the policy reaches the new Flood 2.0 premium. So, if you currently pay $500 a year for flood insurance and the new premium is $3500 a year your policy will increase for the next 11 years! Keep in mind the premiums can change with inflation or policy changes as well.
-The FHIP policies only cover building damage up to 250k and contents to 100k. If you need/want more coverage you will have to go thru the private sector.
-Even tho you only get 250k coverage your premium will still consider the value of your home. Therefore, if your home is worth 300k your insurance will be less than your neighbor’s policy (assuming all other things are the same) whose home is worth 500k.
-The flood program is different based on the city and community you live. So don’t assume if you get a quote for a future home you are looking at in Ocean Springs with an elevation certificate of 21 feet will be the same as one in Gulfport. These community rewards are determined by the NFIP and awarded to places based on their building codes.
-The new flood polices cover replacement costs. However, if your current home is not currently built to the 2009 building codes and you sustain a 60% loss you MAY be required to rebuild at the new code (often this requires you to build up) but your policy will not pay for the cost of this. This is something all buyers should consider when purchasing homes. As you can imagine this has created great concern to some low-lying areas and will most likely impact real estate values and community sustainability. There is talk at Capital Hill to find a better way to implement this but for now buyers should be aware.
When purchasing a home in coastal Mississippi, it is important to have a good estimate of the cost of flood insurance, as well as other forms of homeowners insurance, as they can affect your budget. Working with a reputable insurance provider can help you understand your options and ensure that you have adequate coverage in the event of a flood or other disaster.
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