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

When we talk about the state of Michigan, we have to acknowledge its beautiful lakes hence the nickname Great Lake State. Despite this feat, it's important to note that being surrounded by bodies of water like these is bound to cause some major concerns when it comes to both flood risk and flood insurance.

A homeowner who is close to these bodies of water is also facing a lot higher flood risk due since there's a high chance that when there's heavy rainfall due to a storm, these areas will overflow.

Today, we're going to talk about the good, the bad, and the ugly changes coming to Michigan and its residents with the upcoming FEMA and National Flood Insurance Program's (NFIP) Risk Rating 2.0.

This change is bound to happen 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 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 Good

Let's start with the good change coming to locals of the Great Lake State itself. Now, this can be very surprising considering that FEMA's ruling on flood insurance rates is based on the risks of your property of flooding.

We'll show this change as the green slice and good news for the locals, there will be a decrease in flood insurance rates for 54% or 11,1120 which takes the biggest chunk out of the active FEMA policies in the state. 

The decrease will be more than $100 ($1200 per year) and will be an immediate one for these residents. Considering that in these areas — where most properties sit on that Flood Zone A or AE — residents face expensive federal flood insurance, this decrease will really help those affected.

The Bad

Now, let's talk about the blue slice which takes another big portion of the FEMA policies in Michigan. This represents a bad change because those affected will get an increase in their flood insurance rates starting in October.

About 42% or 8,436 policies will experience this change on their flood insurance rates once the Risk Rating 2.0 takes effect. The increase will start at $0 up to $10 maximum per month ($0 - $120 per year). This could mean that there won't be any change to your flood insurance rates or you might start to get that increase of up to $10 per month depending on the value of your property.

The Ugly

Lastly, let's go over the last slices you'll see with these changes: the pink and grey slices. Both of these will still cause an increase in rates, but to a different degree hence why we call it the ugly change.

The pink slice will impact 3% or 623 policies in Michigan. This means that these residents will get that increase from $10 to $20 per month ($120 - $240 per year). If we were to consider that the average federal flood insurance premium in the state is currently at $1100, you're going to have to deal with that extra $200 added to this once the NFIP 2.0 kicks in.

The grey slice, on the other hand, is what we consider the uglier change between the two because of the drastic increase it's going to bring with it. This will impact 1% or 302 FEMA policies in Michigan. Now, this one really packs a punch and can blow your flood insurance costs out of the water.

The increase for this 1% will be more than $20 per month (>$240 per year). This means that you might even experience an increase to your rates of more than $100 per month depending on your property's value.

You can see the full graph of this Risk Rating 2.0 changes to Michigan below:

These price increases or rate increases can really discourage anyone from going through FEMA and the National Flood Insurance Program (NFIP). This is why it's equally important to consider going through the private flood insurance market. Now, it's true and we share this as a fair warning that there's a chance that private carriers may not be the answer to your insurance needs.

This is generally because the private flood market has the option not to provide any policy when there's a higher risk of flooding in a community or individual property. Other than that, you want to get the most out of the hard-earned cash you're dishing out for flood insurance premiums. No one likes to pay for a $3,000 premium, only to get coverage that's only half of your property's market value. 

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 Michigan, 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.