North Dakota: 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 North Dakota and how they can impact your flood insurance in the future.

North Dakota has been subject to flood damage ever since the 1800s. Due to its proximity to the Missouri River which literally cuts to the middle of the state, the Peace Garden State has always been in the threat of these bodies of water overflowing and causing water to inundate nearby residents.

In 2011, we've seen this happen significantly twice when the largest flood since the inception of six reservoirs for the Missouri River and the largest flood that over the last 25 years sank 25% of its community during the Souris River flood. This type of risk in this hurricane season can be repeated and this is why it's very important to get yourself protected from the damages and aftermath of the flood.

Every year, homeowners in the United States face flood risk, be it through river overflow, heavy rainfall, spring runoff, storm surge, and things like that. This type of flood event can make or break you in an instant which is why it's important to take action and prepare for possible flood damage.

However, getting flood insurance isn't enough, you also have to consider the ever-changing landscape of flood insurance policies both from the National Flood Insurance Program (NFIP) and the private flood insurance market. Today, we'll be talking about the upcoming changes to the National Flood Insurance Program (NFIP) and the Risk Rating 2.0 which will arrive 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. 

Keep in mind that property values aren't the only thing that's going to impact your final flood insurance premium or flood insurance rate with FEMA. We've mentioned many times that FEMA conducts years of thorough research in order to have these changes be more suitable across each state in the country. This means that the following things will also be considered in assessing premiums or rates for homes across the U.S.:

• Overall risk of flooding and flood frequency
• History of flood damage and flood loss
• History and number of flood claims made by the homeowner or for the home
• Flood map designation. Is your home sitting in a low-risk flood zone or a high-risk flood zone also known as the special flood hazard areas (SFHA)?
• Mitigation efforts made. Does the insured property have sufficient flood openings? Is your lowest floor raised above the base flood elevation?

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 changes coming with the NFIP 2.0 to the residents of North Dakota. About 38% or 5,021 policies from FEMA will be able to experience this good change. This will be shown as the green portion or slice in the graphs.

This impact will cause an immediate decrease in federal flood insurance rates which is why we call it the good change. The decrease can be more than $100 ($1200 per year). This can be very helpful when you're sitting in those high-risk zones close to the Missouri River, Devils Lake, or Lake Sakakawea since these are the properties we can expect to have a much higher base premium. 

The Bad

We also have bad changes coming with the NFIP 2.0. This will be represented by that blue portion or slice. This will impact most of the policies that FEMA has in North Dakota covering about 60% or 7,822 FEMA policies in force.

This generally a bad change because it will bring a small increase to flood insurance rates once it takes effect in October. The increase will range from $0 to $10 per month ($0 - $120 per year). The increase may not sound that much however if you're in those high-risk flood zones or the special flood hazard areas (SFHA), the base premium can start very high and this increase can cause significant headaches with policyholders impacted.

The Ugly

Lastly, we want to cover the ugly changes which will be covered by that pink and grey range respectively. It's important to note that the latter will be an uglier change compared to the former.

The pink slice will be covering 1% or 195 policies in the state. If you're in this range, the increase in your rates will range from $10 to $20 per month ($120 to $240 per year).

The grey slice on the other hand will cover another 1% or 124 policies in force and expected to be impacted by this uglier change. The uglier change will come in form of that drastic increase which will be more than $20 per month ($240 per year). This means that you can easily get up to a $100 per month increase depending on the value of your property, flood data, and all that other things.

You can see the full pie graph of these changes to North Dakota 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 North Dakota, 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.