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

When it comes to flood, Illinois is no stranger to this devastating natural disaster especially when you start to look at the history of floods. Even in recent years, the state seems to get no breaks from this. We're talking about the June 2008 flood, the 2011 Spring Flood in the Lower Mississippi River Valley, and the April 2013 Illinois River Flood.

Now, we want to talk about one of your flood insurance options and the one that you can always run to once that private flood option starts to pull away in times of need: the federal flood insurance from the National Flood Insurance Program (NFIP). Specifically, we're going to go over the good, the bad, and the ugly changes that the update to the NFIP will bring with the Risk Rating 2.0

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. 

Since these flood insurance rate increases or decreases depends on the risk rating that FEMA has through conducting long-term research on flood damage, risk of flooding, base flood elevation, flood-prone areas, flood risks like storm surge, runoff, and flash floods, flood maps and types of flood that the area experienced, this can mean that not having the right mitigation efforts can cause you to pay for higher rates.

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.

The National Flood Insurance Program continues to provide flood coverage on both building and contents wherein it maxes to $250,000 and $100,000 respectively.

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

The Good

Starting with the extreme range first, let's talk about that green slice or what we call the good change. This will impact 43% or 15,715 policies in Illinois once the Risk Rating 2.0 starts to take effect in October. 

We call this area a good change because it causes an immediate decrease in your flood insurance rates of $100 per month or more. That totals to a minimum of $1200 annually. This can really help policyholders especially in a state like Illinois where the average flood insurance premium is about $1100 with FEMA's policies.

This can help a lot of people, especially those who are in high-risk flood areas where private insurers may turn away. Since FEMA and the NFIP are bound by the federal government to provide policies for all citizens of the United States, having those lower premiums can really help more people get protected from flood damage.

The Bad

Now, let's talk about another extreme range you'll see with the NFIP 2.0. You'll see this in that blue range or slice which we also call the bad change.

This bad change will impact the largest portion of Illinois federal flood insurance as it will cause an increase to flood insurance rates of 49% or 18,449 policies in the state. The increase will start at $0 and can go up to $10 per month ($0 - $120 per year). Properties impacted by this change will start to pay for more than $1200 per month depending on the value of the property itself.

This also means that the premium increases slightly on your annual payments for FEMA policies. Although it may not sound a lot, if you have higher-valued homes, you might not find this small change to be small at all. It's important to note that this time around, the flood policy price increases in direct correlation to the market value of your property.

The Ugly

Lastly, we want to cover the last two slices you'll see in these reports which we call the ugly change. This is because there will still be an increase for rates on the impacted policies however it will become more significant compared to the previous one. We're going to show this as the pink and grey slices respectively.

First, the pink slice or about 5% (2,052 policies) will experience an increase on their rates from $10 up to $20 per month ($120 - $240 per year).  Whereas, that grey slice will affect 4% (1,466 policies) and will bring an increase of more than $20 per month (>$240 per year) for flood insurance policies in Illinois.

These changes can really blow your insurance premiums right out of the water and cause a burden when it starts to take effect in October since we're talking about a jump from $1100 to $1300 or more.

You can see the full 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 Illinois, 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.