The Federal Emergency Management Agency (FEMA) is rolling out changes when it comes to flood insurance rates across all states in the country. Today, we will unpack these changes coming to Arkansas and how they can impact your flood insurance in the future.
Arkansas, at the time of writing, is currently in a flood warning state due to these low-pressure systems coming in. Since last month, the state is already getting these flood forecasts that minor to moderate flooding. The National Flood Insurance Program (NFIP) is changing this year and it's been a long time coming.
Today, we want to cover the upcoming flood insurance rate changes that the Risk Rating 2.0 (also known as NFIP 2.0) will present to residents of Arkansas come to Fall this year. This update will change the landscape of being prepared for flood risk and responding to all possible flood damage to your personal property. We really believe that the true risk here is not having the right flood coverage from flood waters more than the flood itself.
These changes are expected to start on October 1st, 2021.
The NFIP 2.0
The Risk Rating 2.0, or commonly known as NFIP 2.0 as well, is more of a move of equity. This update on the federal flood insurance program itself will allow you to no longer pay more than your fair share when it comes to premiums as this would now be based on the value of your property or home starting this October.
When it comes to the rate changes happening across the country, you're going to see these colors in ranges which are the green, blue, pink, and grey range bars. Now, each of these colors represents the good, the bad, and the ugly changes coming to each state.
It's important to note that these changes will also include having your rates depend on your property value which includes also the risk of flooding, the distance of your lowest grade to the base flood elevation, flood insurance claims history, and overall flood hazard.
Let's unpack these and see what they mean for flood insurance.
Let's start with the green range or what we call the good change. This will impact 33% of policies with the NFIP in Arkansas or about 4,771 policies. The green range shows that you're going to get a decrease in your flood insurance premiums for more than $100 (up to $1200 per year).
This means that if the average premiums in Arkansas are about $900, you can expect this to go significantly lower starting this Fall. This can really help a lot of people who found it hard to go with the federal flood insurance due to the overall cost of flood policies with FEMA.
This will also be significantly felt by those who are sitting in high-risk flood zones or the special flood hazard area (SFHA) and the coasts where the chance of flood is very extreme in most cases.
When looking at the light blue range in FEMA's Risk Rating 2.0, you have to know that this is mostly a bad change coming to policyholders since this indicates that you're going to get an increase in your rates.
This bad change since about 57% or 8,138 policies will get up to a $10 rate increase per month ($120 per year). It means that you're going to start paying for that premium that starts at that $1000 mark.
This might not mean much for those who carry flood policies for their residential property however this may be a significant issue with premiums for commercial properties where generally the rates and premiums are significantly higher.
Lastly, the ugly change is covered by that dark blue and grey range. We put this in the ugly change even though generally it takes up the lowest percentage, this part has the highest increases in flood insurance rates when it comes to FEMA. Let's break these two down first.
When it comes to that dark blue range, it's going to impact 6% or about 919 policies in Arkansas which will increase from $10 to $20 per month ($120 to $140 per year). That's putting your average premium to $1000 at the lowest.
On the other hand, the grey area — composed of 4% or 570 policies in Arkansas — will get more than a $20 rate increase per month ($240 per year). This generally means that the premium you're going to pay to start this October will be at $1000 or $2000 even.
A full graph of these changes with the NFIP 2.0 can be seen below:
When Will It Happen?
Now, the date when you can adopt this program really depends if you're doing a renewal or if it's a new business policy. You see, you can expect these changes to start on October 1st and you're going to adapt to these rate changes if you're buying flood insurance from FEMA on or after that date.
On the other hand, if you're doing a renewal with FEMA after that date then you don't have to take in these new rate changes until April 1st, 2022.
So, you want to be very ready for this. We've been talking about this since last year since basically the NFIP is already 30 years old already and is in need of this change.
If you have questions on these upcoming changes, what are your flood insurance options in Arkansas, or anything about flood, reach out to us through the links below. You can also watch this on our YouTube channel.
Remember, we have an educational background in flood mitigation and we want to help you understand flood risks through education and awareness in flood insurance and preparedness.