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 Iowa and how they can impact your flood insurance in the future.
The Hawkeye state has been subject to flash floods and spring runoff due to its proximity to bodies of water like the Mississippi River and Lake Michigan. It's always important to remember that these nearby waters can bring flooding to an area given the right conditions. In turn, the state has seen its fair share of the flood, and even just early this year, they went through a spring flood.
Today, as we go deeper into the hurricane season, we want to talk about the upcoming changes when it comes to federal flood insurance. We'll unpack the good, the bad, and the ugly changes with the upcoming National Flood Insurance Program (NFIP) Risk Rating 2.0.
It's important to keep in mind that these changes on flood insurance premiums with FEMA may not affect you since you might be doing a policy with private flood insurance and private insurance companies. However, there's always that chance that the insurer will pull away from your community or decide to non-renew once they deem that the risk of flooding for your property is a bit too high for them. This generally leaves people to go back to the National Flood Insurance Program (NFIP) since there are fewer risks of having that kind of experience with the federal government.
At the end of the day, the biggest flood risk we face is not having enough protection from natural disasters like floods, earthquakes, and things like that. It's always better to be safe than sorry.
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.
The National Flood Insurance Program (NFIP) continues to provide flood coverage for flood damage to buildings and contents (personal property) of $250,000 and $100,000 maximum respectively.
Let's unpack these and see what they mean for flood insurance.
First, let's go over the good things coming with the NFIP 2.0 which is going to be that green slice. This slice is composed of 37% or 4,670 policies in Iowa and will experience a decrease in flood insurance rates.
The decrease can be more than $100 ($1200 per year) and will immediately take effect on policyholders under this range. Since the average premium when it comes to flood insurance from FEMA stands at $1,115 in Iowa, this decrease can really help you save up on those flood premiums. This is significantly better for those who have to pay premiums that range from $2000 to $3000 with FEMA.
A lot of people face a dilemma of buying policies from FEMA since the cost of flood insurance with them is generally higher than the competition. However, with this new rating structure, we encourage people to get flood insurance especially if they have a lower-valued home. This ensures that there's protection for residential properties and commercial ones alike.
Moving forward, let's talk about the blue slice which is another extreme range since it's going to impact 52% or 6,529 policies in Iowa.
This is what we call the bad change due to its impact on flood insurance rates to those policyholders. The increase ranges from $0 to $10 per month ($0 - $120 per year). This means that you're going to start paying for your premiums with FEMA at an average of $1,235.
Lastly, we want to move into the last two slices which are the smallest, but has the most drastic change on flood insurance rates. The pink and grey slices fall under the same ugly change because it's going to bring more increase in rates compared to the blue slice. Let's do a breakdown of these two.
Starting with the pink slice which covers 5% or 624 policies in Iowa, there will be an increase that ranges from $10 to $20 per month ($120 - $240 per year). This means that you'll start paying up to $1400 average for that federal flood insurance.
On the grey slice, we're talking about an increase coming to 6% or 815 policies in Iowa. The increase will be more than $20 per month (>$240 per year). This means that you may get an increase of up to $100 or more depending on the value of your property. This can easily bring your premium to that $1500 base price and it may be higher than that.
This can be very difficult to adapt especially for those with higher-valued homes since you might pay for something like a $2,000 flood insurance premium, but you will only be covered to $250,000 on a $1,000,000 property.
You can see a 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 Iowa, 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.