If you own property in South Louisiana, chances are you’ve noticed that your flood insurance rates keep getting higher and higher. While some of the causes behind the increases are no secret, understanding how and why rates are going up, and what you can do to help reduce your premiums, may be useful tools to have in your property insurance toolbox. We reached out to a few experts in the industry to get some of their insight (and tips).
For Marc Eagan, president of Eagan Insurance, five factors play a role in affecting pricing and availability for both commercial and personal homeowners in South Louisiana, including:
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Our exposure to hurricanes, which is becoming more frequent and severe;
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The higher costs of construction on materials like lumber and steel, along with fuel costs, and overall inflation;
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Challenges in valuing the estimated costs to repair or replace a damaged home or business (also known as insurance-to-value);
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The security, or ability of the insurance company to pay claims after a catastrophe; and
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The fact that flood insurance on commercial buildings and homes is provided by the federal government which, come this April, will move toward a new rating basis for building and contents insurance renewals.
That last point is a big one. For decades, the National Flood Insurance Program (NFIP) rates have been based on the location, or “zone” of a property. Michael Hecht, president and CEO of Greater New Orleans, Inc., said the new rating system includes risk factors that could drive up a lot of premiums.
“Under the new Risk Rating 2.0 formula, rates for NFIP policies are now based on an individual property’s risk factors,” Hecht said. “That includes things like the distance from water, rainfall and costs to rebuild the home.”
So, what can you do about it? To start, if you’re buying a home, try to assume (take over) the previously existing NFIP policy, if there is one. “That’s the best thing you can do,” Hecht said. “It’ll help ensure that any rate increases are limited to 18% per year.”
Additionally, because we can expect more frequent and severe catastrophic weather events in the future, risk mitigation measures regarding windstorms may prove to be beneficial in the long run. Your property may receive premium discounts or credits for protective measures such as installing impact-resistant windows and/or adding screws between roofing nails, which can provide more reinforcement. Small measures taken today could pay off tomorrow.
Taking steps to “disaster proof’’your home is definitely a way for a homeowner to actively upgrade their property in a way that can potentially directly affect their premium. Invest in double-pane windows with tempered glass, install roll-down or folding storm shutters, upgrade your garage door to a wind-rated door with steel mounting plates, air seals, specialty locks, or high wind rating, and consider how your landscaping may either add to or detract from your home’s potential for damage. Overgrown trees, uneven yards and poor maintenance can all lead to conditions that make your property more disaster prone.
Marcus Dempsey, Owner/Operator Crescent City Home Inspection
Michael Hecht
President and CEO
Greater New Orleans, Inc.
Get an elevation certificate for your property. We’ve seen many examples of policyholders with a certificate receiving some benefits under Risk Rating 2.0.
Marc Eagan
President
Eagan Insurance
Continue to monitor your property insurance situation with respects to insurance-to-value, market availability, deductibles, terms and conditions, mitigation efforts, etc.. These actions are vital.
