Hawaii Flood Insurance: New Federal Flood Insurance Risk Rating 2.0

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 Hawaii and how they can impact your flood insurance in the future.

Hawaii has been subject to major flooding in very recent years. We're looking at the incidents in the Ka Loko Reservoir in 2006, the series of thunderstorms over Kaua'i and Oahu in 2018, and the most recent one that flooded the Kaupakalua Dam in the earlier parts of March this year.

In times like this when floods seem to be always there and ready to hit you hard, we want to help our friends in Hawaii understanding their flood insurance when it comes to the federal government. We want to cover the good, the bad, and the ugly changes coming with the National Flood Insurance Program (NFIP) Risk Rating 2.0 on October 1st and what you can do to better prepare and protect yourself from floods.

It's important to note before we move forward that there is still that private flood insurance option available that is known for having shorter waiting period for policies to take effect. However, there's a chance that some communities or areas where the flood risk being too high will cause them to pull the plug in providing insurance for that area.

So, if you want to opt-in with FEMA and the National Flood Insurance Program, you should start as soon as possible so that you can maximize that 30-day waiting period.

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 represent these changes with flood insurance rates from FEMA. Now, each of these colors represents the good, the bad, and the ugly changes coming to each state.

Let's unpack these and see what they mean for flood insurance.

The Good

To better understand these ranges, it's best that we discuss each change per item on the current FEMA flood policies in force in Hawaii right now. Out of about 61,400 flood insurance policies, 13% (7,924 policies) of these will experience what we call good change.

This change means that the 13% of on that green range will get an immediate decrease of more than $100 on their flood insurance rates ($1200 per year). So that average of $700 premium will really go down for those property owners impacted by this upcoming update.

The Bad

On other hand, we're going to look at the most extreme range that will impact most of these policies under FEMA in Hawaii. This is the blue range in FEMA's reports or the 78% (48,098 policies) will go through this bad change.

We call this a bad change because there's going to be a $0 to $100 per month increase on flood insurance rates ($0 - $120 per year) on your flood policies starting this October.

The Ugly

Lastly, let's go over the ugly changes which are represented by the smallest ranges in these reports. The pink and the grey ranges are 5% (2,812 policies) and 4% (2,549 policies) respectively. Both of these will bring an increase to FEMA policyholders and can be very drastic for those impacted. Let's unpack these increases.

Starting with the 5% or about 2,812 FEMA policies will get that increase on flood insurance rates starting at $10 and up to $20 per month ($120 - $240 per year). This can get your premiums to more than $900 with FEMA once this change takes effect in October.

On the other hand, the 4% or 2,549 policies impacted under that last range will get an even uglier change because this will get you an increase of more than $20 per month (>$240 per year). This generally means that your flood insurance premiums will start at that $1000 mark easily and can blow it right out of the water once the NFIP 2.0 takes effect in October.

We made a graph of these changes 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 Hawaii, 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.