Why is the NFIP so Expensive? How Agents Can Offer Competitive Options.
- CATcoverage.com
- Sep 25
- 4 min read
Updated: Sep 29
In recent years, many homeowners and agents have noticed that NFIP flood insurance rates have gone up a lot. If you sell (or buy) flood insurance, it helps to understand why—and what alternatives exist so your clients aren’t stuck paying more than they need.
What is NFIP and Risk Rating 2.0?
NFIP: National Flood Insurance Program run by FEMA. Lots of people use it to comply with lender or local floodplain requirements.
Risk Rating 2.0: FEMA’s newer way of pricing flood insurance (fully implemented by April 2023). It uses more detailed data about each home’s flood risk, not just flood zone. It’s designed to be more “equitable” so people with lower value homes or lower risk pay less, but also so high risk pays more in line with actual flood risk.
Key Factors Causing NFIP Rate Increases
Here are the major drivers behind the rising rates:
More precise risk data
Homes are now rated using:
Distance to water
Elevation of basement or first floor
Flood frequency (rain, storm surge, etc.)
Replacement cost of the building
Rising costs of construction and repair
Inflation, materials, labor—all more expensive. So, when a flood claim happens, rebuilding costs are much higher than before. NFIP needs to cover that.
Climate change & more frequent extreme weather
More storms, heavier rain, worse flooding events = more claims. NFIP’s historical models had less emphasis on some of these newer risk factors.
Program solvency and legislative caps
NFIP has long had debt and funding issues. Rate caps (limits on how much premiums can increase in a year) and subsidies have kept rates artificially low for some, but that also means other policyholders absorb more cost over time.
Removal or reduction of subsidies / older discounted rates
Homes that were getting favorable pricing (due to subsidized or grandfathered rates) are being brought closer to “full risk.” That means more people see increases.
What Agents Should Know: Impacts & Opportunities
Some clients may see rate decreases under Risk Rating 2.0, especially if their risk is lower. Not everyone is going up.
Clients near water, low elevation, old homes, or expensive rebuild costs often get hit the hardest.
Flood insurance becoming more expensive might push clients to look at private flood insurance or alternatives. That’s where you (the agent) can add value.
Private Flood vs NFIP: Competitive Options
Agents who want to offer an alternative to the NFIP can sign up to offer NCIP (Natural Catastrophe Insurance Program) private flood insurance. View our NCIP vs NFIP chart to see all the benefits we can offer you and your clients.
How Agents Can Help Clients Navigate Rising NFIP Costs
Here’s what you can do to show value:
Review client’s current NFIP policy details (flood zone, elevation, rebuild cost) and help them understand Risk Rating 2.0’s effect.
Compare NCIP private flood insurance quotes with NFIP options to see if your client may benefit from a more competitive solution.
Highlight features clients care about: coverage limits, additional living expense, waiting periods, etc.
Encourage mitigation efforts (e.g., raising structures, sealing basements, flood vents) because sometimes that reduces premiums.
Why Agents Might Want to Become Producers with CATcoverage
If you aren’t already a producer, here are reasons to consider it:
You can offer NCIP private flood insurance—one app shops multiple carriers.
Commission structure: up to 15% commission on new flood policies.
Broader coverage options: higher limits, basement contents, extra features.
Fast digital onboarding, nationwide (in most states) presence.
Wise Path Forward for Flood Insurance Pricing & Options
Flood risk is rising, and NFIP pricing reforms (especially Risk Rating 2.0) are pushing rates up so that prices better reflect the actual risk. That means in many cases, NCIP private flood insurance is becoming a more viable alternative to help clients manage cost, increase coverage, or get better terms.
By offering both NFIP and private flood options, agents can deliver more value, transparency, and choice. For clients, comparing both paths may reveal savings, better coverage, or peace of mind in a flood event.
Top 5 FAQs: Why Is the NFIP So Expensive?
1. Q: Why are NFIP rates going up?
A: FEMA’s Risk Rating 2.0 uses more detailed data—like distance to water, elevation, and rebuild cost—to reflect actual flood risk. This often results in higher premiums for high-risk properties.
2. Q: What factors drive NFIP premium increases?
A: Key drivers include more precise risk modeling, rising construction costs, climate change impacts, and the phase-out of subsidies or grandfathered rates.
3. Q: Do lenders accept private flood insurance?
A: Yes, as long as the policy meets NFIP-equivalent standards. Most private flood policies, including NCIP, are designed to meet these requirements.
4. Q: How can agents help clients manage rising NFIP costs?
A: Review their current policy, explain Risk Rating 2.0, and offer private flood options like NCIP for broader coverage or competitive pricing.
5. Q: How fast can I quote private flood insurance through CATcoverage.com?
A: Simply sign up with our entirely online process. Get approved and start quoting in minutes.
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