Arkansas Flood Insurance: Jonesboro, Arkansas Risk Rating 2.0 Updates

We have already dove into the upcoming changes to the flood insurance rate in Arkansas statewide in our previous blog.

Today, we want to dive deeper into further understanding these changes as we focus on smaller parts of the state, the counties that are most impacted by these upcoming events to the federal flood insurance rates.

NFIP: Federal Answer to a Flood Event

We encourage everyone to get a flood policy for your properties since flood happens everywhere and most of the time without notice. However, getting flood insurance is simply the first step in making sure that you're protected. We've seen a lot of policyholders caught off guard due to the changes they missed out on when it comes to their flood insurance costs or policies in general.

There's a lot of flood insurance companies that can help you write a policy for your home, so it isn't really a question of where to get it nowadays. You have private insurance companies building up a community for private flood insurance and also the more widely known federal government and the National Flood Insurance Program (NFIP).

These NFIP flood insurance cover both damages to the building and contents. When we say building, this generally pertains to a residential property or a commercial structure that gets flood coverage that maxes out to $250,000 (up to $500,000 for commercial flood policies only). At the same time, you'll also find contents coverage of $100,000 or the personal property you have listed with the insured building.

FEMA and the NFIP also help in other ways as well since policyholders are eligible for their Increased Cost of Compliance (ICC) and what's called the Community Rating System (CRS). The ICC is an additional $30,000 flood coverage to give way for flood mitigation efforts for the insured property to avoid massive losses from a future flood event.

The CRS on the other hand is a community-based rating system that measures the overall flood mitigation efforts made by the community in general; basically, this means that the higher your CRS score is, the bigger the discount you'll get. 

Risk Rating 2.0

First, let's go through a brief rundown of the changes coming to the National Flood Insurance Program (NFIP) which is provided by the federal government under the Federal Emergency Management Agency (FEMA). These changes are through what's called the Risk Rating 2.0.

This is what FEMA calls equity in action when it comes to making the cost of flood insurance policies fairer per policyholder. Generally, this is because property values for each individual property will be accounted for when finalizing your quote and flood insurance premiums with the National Flood Insurance Program (NFIP).

It's important to note, however (as we've mentioned in our blog for Arkansas state) that this won't mean that the cheapest flood insurance will go to lower-valued homes. It's equally important that we take into account, just like FEMA does and the private flood insurance industry, what's called a flood risk variable which includes, but is not limited to the following:

• Flood zone designation in the flood map. Is the property in a high-risk flood zone or a low-risk flood zone?
• Overall risk for flooding in the area and chance of flooding
• History of flood incidents, flood damage, and flood loss experienced by the insured property
• Flood claims made in the last ten years 
• Mitigation efforts made on the property. Are there enough flood openings? Is the lowest floor above the base flood elevation?
• Flood hazard like is there a close water source or body of water?

Today, we want to focus on the good, the bad, and the ugly changes to Craighead County's policyholders with FEMA in this new rating methodology. The Risk Rating 2.0 and its changes will be starting this October 1, 2021. 

The Good

We want to cover the good things coming to Craighead County people first. We'll divide these good changes into two to specify the changes coming to flood insurance rates. This good change will bring an immediate decrease in the premium rates of those impacted.

About 56.6% or 534 of the policies in the county will get impacted by this change. The first half will impact about 33.5% or 316 policies will be getting a decrease that ranges from $0, which means there'll be no change at all, to $50 per month ($600 per year).

The other half of this good change impacts 23.1% or 218 policies which will get a better deal since the decrease ranges from $50 to more than $100 per month ($600-$1200 per year). 

The Bad

Now, let's move into the bad news and bad changes that the Risk Rating 2.0 will bring to residents of Craighead County in Arkansas About 39.2% or 370 policies in force from FEMA will get an increase ranging from $0 to $10 per month ($0 - $120 per year).

This means that if you're part of this blue portion in the graph, you're either going to get $0 or no change with the rates you're paying or pay an increase of $10 per month once the Risk Rating 2.0 kicks in.

The Ugly

Lastly, let's move to the farther end of the graph and talk about the ugly news. This is divided into three parts: what we'll call the less ugly, the ugly, and the ugliest. 

The less ugly will impact 3.5% or 33 of the policies. This will create an increase for those impacted once the Risk Rating 2.0 kicks in. The increase will be ranging from $10 to $20 per month ($120 - $240 per year).

On the other hand, when it comes to that ugly portion, we're going to start to talk about a more drastic increase in flood insurance rates. Another 0.6% or 6 policies fall under this change. The increase in rates will be from $20 to $50 per month ($240 to $600 per year). 

Lastly, the ugliest of these three is something that 0.1% or only one policyholder will have to deal with. The rate increases, this time around, from $50 to more than $100 per month ($600 - $1200 per year).

This price hike can easily be deemed as an alarming increase especially for the low-income communities that might be impacted by this change. This is why it's equally important to understand your flood insurance options as this increase may not help your situation and only cause more headache than peace of mind.

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.