The cost of FEMA flood insurance policies is rising, but taxpayers are still helping foot the bill


Life on the water is a dream for many owners – until their property floods.

After Super Hurricane Sandy tore through New Jersey, some homeowners moved to avoid the risk of severe flooding, but many stayed and rebuilt. And there has been no slowdown in construction in flood-prone areas, even as severe storms and flooding are becoming more frequent due to climate change.

Flood insurance the policies allow people to stay in areas that are at risk of being under water one day.

For decades, taxpayers have subsidized flood insurance rates, but new premium calculations by FEMA will adjust rates to better reflect the true risk of flood-prone homes. Costs will be higher for 79% of insured homes in New Jersey, but it will be years before owners of the state’s riskiest properties pay the full premiums.

The average cost of a flood insurance policy in New Jersey is $949 per year, often cheaper than an annual auto insurance policy. Low premiums coupled with high payouts have left the National Flood Insurance Program (NFIP), which is operated by the Federal Emergency Management Agency (FEMA), more than $20 billion in debt. Another debt of $16 billion was canceled in 2017.

The program covers some 217,000 properties in New Jersey and 5 million nationwide. Over the past 10 years, it has paid an average of $47,700 per claim in New Jersey alone.

“It’s hard to rationalize taxpayer support for people who live in flood-prone areas,” said Peter Van Doren, senior fellow at the Cato Institute.

He said that’s not how the program, which started in 1968, was supposed to work.

Van Doren cited a 2015 National Research Council (NRC) report, which said it was expected that over time, properties receiving subsidized premiums would eventually be lost to floods and storms.

But that didn’t happen. Congress tried to reform flood insurance in 2012, but then Sandy struck.

Complete devastation at the base of the Mantoloking Bridge, where the Atlantic Ocean and Barnegat Bay created a new inlet after Hurricane Sandy destroyed areas of the Jersey Shore. November 1, 2012 (Andrew Mills | The Star-Ledger)Andrew Mills | The Star Ledger

“FEMA then released new flood maps indicating increased risk and thousands of homeowners faced large premium increases,” Van Doren said, noting that Congress later backed down from attempts to previous reforms.


Whether a policy covers a multimillion-dollar home or a bungalow, the cost has been essentially the same, leaving lower-cost homeowners to pay similar rates to mansion owners.

This is slowly changing under the new flood insurance price assessment called Risk assessment 2.0. Rather than just considering the flood zone a property is in and whether a home is elevated, rates will now be based on rebuilding costs and the value of the property. unique flood hazard, FEMA said, noting that the change will make prices fairer.

“The changes that are being made will make the program more economically sound so that it is not a burden on the taxpayer,” said Jerry Theodorou, director of insurance at the R Street Institute, a public policy research group. non-profit. “We consider it unfair for ordinary taxpayers to subsidize the cost of flood insurance for people who can well afford it.”

He said he recently asked the leadership of the National Flood Insurance Program how long it would take expensive, riskier homes to pay the actuarially correct cost given that premiums, by law, can at most be increased. 18% per year.

“The answer was 10 years or more,” he said.

The way to achieve economic strength would be to let the private market take over, Theodorou said.

“The government doesn’t need to be in the business of flood insurance,” he said. “The bad news is that this year they’re going to lose more money, but gradually you’re going to start to see rates approach actuarially sound levels, and that’s a good thing.”


The new premium calculation went into effect earlier this month for new policies, and it will begin in April for current policyholders, who make up about 6% of New Jersey’s more than 3.6 million housing units. , based on census data. Some rates will go up while others will go down.

An analysis of FEMA Data shows that Camden, Morris and Passaic counties are among the top 125 counties in the nation that will see the highest rate increases of $1,200 a year or more in the first year alone under the new system, a said Nick VinZant, principal research analyst for QuoteWizard, a division of online mortgage company Lending Tree.

Here’s a look at the percentage of policies, by zip code, that will see their premiums increase in New Jersey.

When the new rates go into effect, 79% of federal policies in the state will increase. Of the 217,200 New Jersey properties with policies, about two-thirds, or 137,075, will see increases of $120 or less per year. Ten percent, or 22,426, will see increases of between $120 and $240 per year. Five percent, or 11,364, will see costs increase by $240 per year or more.

“We’re still going to subsidize some of these at-risk homes, but this is the start of a new trend in flood insurance,” VinZant said. “Seaside mansions will pay a larger and larger share in the future. Riskier properties will pay their fair share. ”

Twenty-one percent of properties will actually see their costs go down.

Salem (47%), Cumberland (42%), Essex (38%) and Union (38%) counties have the most policies whose costs will drop, according to FEMA data.

Hudson (87%), Ocean (83%), Hunterdon (83%) and Burlington (81%) counties will see the largest percentage of premium increases.

It will take some homes many years to reach what FEMA calls a “total hazard rate,” or the total amount a policy would cost under the new formula. Indeed, according to the law, the rates cannot increase by more than 18% per year.

Sen. Bob Menendez, who has said he plans to reintroduce legislation to lower the annual increase to 9%, said the current increases will escalate quickly.

Only 50% of primary residences will reach full rate after five years, 40% will take five to 10 years and 10% will take longer, his office said.

“So it’s easy to see how increases can run into the thousands of dollars,” he said. “On a more immediate level, 316 policyholders in New Jersey will see an annual increase of at least $1,200 below the 2.0 risk rating in the first year, including four in Paterson with a median household income of $41,000 per year.


People who remain in flood-prone areas will continue to roll the dice because of climate change, VinZant said.

“Flood insurance used to be around a 100-year flood, but we see these 100-year floods every 10, 5, or even every year,” VinZant said.

He said new research suggests that the number of people who should have flood insurance or are going to need it, in most places, will only increase, in part because “some of the maps of the FEMA are 40, 50 years old and largely obsolete.” .”

Hurricane Ida and its aftermath in New Jersey

On flooded Rt. Jan. 1, Lawrence Fire Company personnel ferry residents to safety in a nearby Wawa early in the morning after devastating rains fell in the state from the remnants of Tropical Storm Ida . (Michael Mancuso | NJ Advance Media for Mancuso | NJ Advance Med

The First Street Foundation, a nonprofit that assesses climate change risks, says some 6 million homes across the country are at risk of flooding but are not on FEMA maps.

It says there are 445,251 properties in New Jersey — or 13% of properties in the state — that have more than a 26% chance of being severely affected by flooding over the next 30 years. it offers an online tool which gives a specific flood risk per municipality.

FEMA still does not incorporate climate science into its estimate of flood risk, the group said.

“So while they update the risk assessments, not including projected climate impacts means the program could continue to rest on rocky financial foundations in the future, as climate change drives worsening flood risk,” the First Street Foundation said.

Part of the solution may lie in blue acres, a program that buys out owners of at-risk properties, something Governor Phil Murphy addressed after Hurricane Ida caused widespread flooding and killed 30 people.

“There’s no amount of mitigation that we can put in place that’s going to keep (the risk properties) of storm intensity and frequency from reality,” Murphy said.

Shawn LaTourette, commissioner of the state’s Department of Environmental Protection (DEP), said in September that the state had increased funding in the Blue Acres program.

“Now we have this greater capacity, and we will use it, no doubt,” he said.

The program has been in place since the 1990s but was not widely used until after Super Hurricane Sandy. She has offered to buy more than 1,100 homes since 2013, but only 830 owners have accepted.

“For a community to accept their risk and actually say to themselves that we have to uproot ourselves and find a new community…it’s a big cultural undertaking,” he said.

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Karin Price Mueller can be reached at


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