The National Flood Insurance Program (NFIP) uses its approach to calculate flood insurance rates based on a unique combination of rating variables for each property to reflect its flood risk.
These examples show the cost of flood insurance for single-family homes under NFIP’s pricing approach, using data from single-family policies in-force as of August 31, 2023.
Learn more about the switch from the legacy rating method to NFIP’s pricing approach.
View the Data
Example 1: Policies by Price Range
Example 1 groups single-family insurance policies by price range, showing the number and percentage of policies in each range.
This example shows:
- Median replacement cost in each price range
- Percentage of policyholders facing different kinds of flood perils
All insurance costs shown in this exhibit are annual risk-based costs. They are not necessarily the current costs policyholders are paying today.
Some policyholders are on a “glide path” toward their full risk-based cost. For more information on risk-based versus current costs, please see the terms and concepts below.
Examples 2, 3 and 4: Policies by State, ZIP Code and County Level
Examples 2, 3 and 4 show summaries at the state, ZIP code, and county levels.
These tables show:
- Number of single-family policies in each area
- Median risk-based cost of insurance
- Median current cost of insurance
- Percentage of policies affected by specific flood perils
How to Read These Examples
Terms and Concepts
Range of Cost of Insurance: Price ranges for insurance premiums. This is based on total risk-based costs per year. See below for risk-based versus current costs.
Policies in Force (PIF): Number of insurance policies. These exhibits only show policies for single-family homes, where each household has its own policy. The data does not include multi-family and non-residential policies because these have different coverage amounts and values than typical single-family homes.
PIF Distribution: In Exhibit 1, the PIF distribution is the percentage of policies within each price range. For example, 37% of policies nationwide fall into the $0-1,000 range, while 32% cost between $1,000 and $2,000 per year.
Average RCV (Replacement Cost Value): The estimated cost of replacing the building and any insured contents after a disaster. This calculation is based on a number of factors such as the building’s square footage and ZIP code. In the national data, homes with flood insurance costs that are less than $1,000 per year have an average RCV of $400,587.
Risk-Based Cost of Insurance: This is what policyholders would pay if they were paying their full actuarial rate as evaluated under the rates implemented Oct. 1, 2021. This rate is based on the expected costs of losses and programmatic expenses, without subsidies. Many policyholders pay less than their full rate (see below). These full-rate estimates will be updated periodically as risks change.
Current Cost of Insurance: This is what policyholders are paying today. 38% of single-family home policyholders are already paying a risk-based premium, while others are paying lower premiums by law. When a policyholder’s capped current premium is below their risk-based premium, their premium will increase towards the full rate. This increase is called a “glide path.” By law, rates cannot increase by more than 18% per year for most policyholders.
Under the legacy approach, all NFIP policyholders were subject to premium increases every year. Under NFIP’s pricing approach, annual increases will eventually stop once the full-risk rate is realized.
Percentage of Policies with Exposure to Various Flood Perils: The percentage of policies exposed to each type of flood peril. In Exhibit 1, this is the percentage of policies within each price range that are exposed to each type of peril. In Exhibits 2-4, this is the percentage of policies in each geographic area exposed to each type of peril.
How Premiums are Calculated Under the NFIP Pricing Approach
NFIP’s pricing approach is an actuarially sound approach to setting flood insurance premiums. The previous methodology set rates based on geographic zones and elevation. NFIP’s pricing approach uses the best available flood risk data to set premiums based on each property’s individual risk.
It looks at factors including:
- Likelihood of different types of flood perils (flash flooding, floods caused by waves or high-water levels, coastal erosion, and more)
- Characteristics of the building (foundation type, first floor elevation, etc.)
- Elevation and distance from flooding sources (coasts, rivers, lakes)
- Replacement cost value of the building (cost to rebuild after a disaster)
- Ways a building is adapted to withstand floods, such as flood vents
- Levee performance
Risk is dynamic. When it changes, premiums can change. Decisions that communities make about development and infrastructure can increase or reduce the flood risk throughout a community.
Why Flood Insurance is Getting More Expensive on Average
Flood insurance exists to help support people after natural disasters. The National Flood Insurance Program is mandated by Congress to set rates that are actuarially sound to reflect each covered property’s true flood risk and are fairly distributed based upon individual risk levels. NFIP’s pricing approach is part of an ongoing process to bring rates in line with risks.
FEMA recognizes and shares concerns about the cost of flood insurance and how higher premiums can affect communities. Premiums include operating costs and other related costs. FEMA aims to align these costs as premiums increase, which would translate to a lower, risk-based cost of insurance.