It's the question that gets asked probably a hundred times a week. Insurance agents, property owners, and even banks want to know the answer.

Everyday we see FHA loans fall apart because of flood insurance. Many times flood insurance through the National Flood Insurance Program can be higher. Then you might have to pay the cost of an elevation certificate.

In 2019 FDIC made a major move in the industry when it started to allow private flood insurance.

People assumed this meant FHA would start accepting private flood insurance. However, because FHA insures loans they have different guidelines they do not accept private flood insurance. As of July 2022 FHA still only allows flood insurance through the National Flood Insurance Program, but hopefully, that will be changing soon.

On November 10, 2020 FHA made an announcement they were looking at accepting private flood insurance. They opened up a 60 day comment period for people to leave comments on this possible action.

So what happens next and what will be the impacts?

 

What's Next

After this 60-day comment period FHA will look at the comments and probably make a decision by the 2nd quarter of 2021. If they decide to approve it then they would probably delay it going into effect by 6 months. This is what FDIC in 2019.

So what could the impacts be?

 

The Impact

Well if you currently have an FHA loan then these could possibly cause a major decrease in your mortgage payment. You might see a 40% rate decrease in the private market.

 

However if this is passed don't go and try to jump to the private market right away.

FEMA has strict guidelines for cancellation. Unless you are refinancing your house you may not qualify until your policy is up for renewal.

 

In 2019 we saw a lot of people lose money because of FEMA cancellation rules. Many times private carriers require payment up front and charge minimum earned premiums.

This means you might be out 25% of the money you paid for a private policy because FEMA won't let you cancel.

 

We will continue to monitor this situation and continue to educate the public as this process moves forward. If you have questions about your flood insurance options then click here.

Want to learn more about flood insurance?

Check out our YouTube channel and Podcast.

Remember we have an educational background in flood mitigation which means we are here to help you understand flood risks, flood insurance and mitigating your property long term.

 

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Flood zone AE also referred to as the 100 year flood zone has the highest premiums other than coastal areas. These are generally because most of the structures have a negative base flood elevation. So what determines the premiums of these zones?

Well there are a few things that have a major impact on flood premiums in these zones. The age of the structure, the foundation type, flood loss history, and the elevation of the home.

Let's start with the age of the structure depending on when the house was built it will have a different rating model through FEMA. Its based on the first flood map for structure which generally occurred after 1978. If it was before the first flood map its called a PreFirm structure and if its after the first flood map its called a PostFirm structure. One of the big differences between these two types of structures is called grandfathering where you can keep the property in a preferred flood zone that no longer exists. This is allowed on PostFirm structures but not PreFirm structures.

The next thing that has a major impact on flood insurances rates in flood zone AE is the foundation type. Let's start with crawlspaces above grade compared to subgrade. Above grade is a crawlspace that sits above ground and subgrade is going to be crawlspace that sits partially below ground. The big difference here is subgrade generally will sit a certain level below the base flood elevation which increase the premium. While above grade sits above ground it could still be below the base flood elevation. The difference is things like flood vents can significantly lower the premiums with above grade crawlspaces.
The next type of foundation that will have a major impact on premiums are basements. As you can imagine basements can sit a good distance below the lowest adjacent grade creating a significant negative elevation. This can have a big difference on the rate so its very important to understand this when owning a house and purchasing a house. Also just because a basement is below grade does not mean that it is below the base flood elevation. Now that we have talked about foundations lets talk about how the elevation of the home in a flood zone Ae can impact the rate.The only real way to know this is to have a survey or elevation certificate completed. Now that we have discussed how the elevations of a home can have a major impact on flood insurance rates as you can see from the different foundation types.

Lets talk about positive elevations first and how they can have a big impact. The further your home is above the base flood elevation the better the rate is going to be. If all the elevations of your home are above the base flood elevation your home might even qualify for a letter of map amendment. This means that your property might be removed from the high risk flood zone and placed in a low risk flood zones causing a big improvement to property values. Now lets talk about the impact of negative elevations. As mentioned above basements can cause a home to have an extreme negative elevation. The higher the negative elevation a home has the higher probability of a flood occurring. This can create a double edged sword because the NFIP rates can be through the roof sometimes exceeding $10,000 a year for non coastal properties. However the other problem is the higher the negative elevation the less likely that a private insurance carrier will offer coverage on a property. So these are some things to think about when buying a home with a basement or building a home. we have discussed the impact foundation types can have on a structure lets talk about flood loss history.

Flood losses can have a major impact on a property. It could even stop a property from selling if severe enough. Generally when one flood loss occurs you would lose the preferred rating with the NFIP if you had one. Having a flood loss can also eliminate most of the private flood insurance options as most will not insure a property that has had a loss. However when the second loss and paid claim occur is when disaster can strike. This can turn a property into a severity loss property which has to follow certain mitigation guidelines in order to get insurance through the National Flood Insurance Program and private flood insurance is not available on these type of properties. This is why you should really review things closely before filing a flood insurance claim.

Have questions about flood insurance? Click the link below or visit The Flood Insurance Guru Find My Flood Risk and Flood rate

 

pelham al home buyers beware

Hello, Chris Greene, with the Flood Insurance Guru here, where we have an educational background in emergency management with a specialization in hazard and flood mitigation. So we can help you understand your flood insurance options, how to minimize your flood risk, and possibly even how to get your flood zones changed. Today we're going to be talking about the major impact that the new flood insurance rates to the National Flood Insurance Program are going to have in areas like Pelham, Alabaster, and Helena Alabama.
Effective January 1st, 2019 the National Flood Insurance Program has put in some rate increases. Today we're going to talk about those rate increases when it comes to residential properties, investment properties, secondary properties, lake properties, second homes, commercial properties, properties that have been newly mapped to a new high-risk zone, and preferred policies.
So the first thing we're going to talk about is a primary residence. This is going to be your primary home. Let's say you have a policy now through the National Flood Insurance Program. It costs you $1,000 a year. You're looking at a 7.2% rate increase this year, effective January 1st, 2019, which is going to have an impact on you of about $72 a year, which isn't too bad. The big impact is going to be in areas like secondary residences, and commercial properties like we've mentioned. These areas are having a 24.2% rate increase. So let's say that you have a rental house that you're renting out, and it can't be considered your primary residence. If your flood premium is $2,000 a year then you are looking at almost a $500 rate increase per year, and that's just this year. So this could have a big impact on the profitability for a rental house.
Some other areas. Let's say you have a commercial business that has to have flood insurance and your flood premiums are $2,000 a year, you're looking at almost a $500 per year rate increase, for this year. The good thing is on other things like your preferred policies or zone X It's only having a 1%. So on a $1,000 premium, you're literally talking about a dollar and that's it, which is great news for these areas.
Remember, minimal risk areas or zone X generally have flooding 30% of the time. So just because you're in that low-risk zone doesn't mean you don't need flood insurance. It just means that FEMA has not determined it to be a high-risk area, and has not determined the base flood elevation. Other areas where you're going to see a rate increase are what's called newly mapped areas.
So let's say that a property is mapped to a flood zone AE, which is a hundred-year flood zone out from a flood zone X. Of course, during the first 12 months, you can take advantage of new mapping rules, which basically give you that preferred policy rate for the first 12 months. Well, you're going to see a 15% rate increase on those policies now. Now also remember that rate is only good for the first year, and that is there to help you adjust to what your flood premium's going to be. So it's very important that you look at these things.
It's also important that you understand the private flood insurance options and all your flood insurance options overall in Pelham, Alabaster, Helena, Alabama all these different areas where you're going to start seeing a lot of these flood rate changes. 

 

Remember we simplify flood insurance and understanding flood risks through education. If you want to learn more about flood education please visit our learning center by clicking below.

 

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The Build Back Better Act has been going back and forth on whether or not it aims to tax the higher-earning households or not. A lot of things are coming with President Biden's expansive social and environmental bill that aims to create a better quality of life for families across the United States. This includes providing and helping American families during crisis especially after what we experienced due to COVID-19 and addressing climate change impacts to our communities.

Does Build Back Better Mean Better Flood Insurance?

In the midst of the shape-shifting nature of political parties, the initial intent to address the risks and dangers of climate change is being scaled down. We won't dwell into the politics of it all despite it having a firm grip on how Build Back Better goes; that's a story for another day.

Will Build Back Better really build a better structure against climate change and really address the needs of our country's first line of defense against floods? Is Build Back Better just building a broken flood future for America?

What Build Back Better Includes

In the article of MSNBC on explaining the coverages of this act, they covered the following: $380 Billion will be for Child Care and Education, $555 Billion will be for Climate Change and Clean Energy Investments; this generally covers the $12,500 incentive for those looking to buy an electric car like Tesla or install solar panels. Capping prescription drugs costs at $2,000 per year for seniors as well as including Medicare coverage for hearing benefits, and $200 Billion for child tax credit extension to name a few.

Does Build Back Better Mean Better Flood Insurance?

However, as the bill was passed a lot of things got changed such as taking out the dental and vision coverage, free community college, lower prescription drug costs, and the paid family leave which was something that public polls were really hoping for.

The changes also include a significant scaling down of funding for the risk mitigation for climate change which is, to be honest, what Build Back Better was for.

Does Build Back Better Include Flood Risk?

Flood Map

We want to focus on the significant changes on how Build Back Better addresses one of the key concerns with climate change and safeties of families across the country: the federal flood insurance.

Build Back Better was initially drafted to cover $3 Trillion to ensure that all items are ticked by dotting all the i's and crossing all the t's, but across its 12-week course, a lot of things were cut down and only about $1.75 billion was approved by the senate. Simply put, this meant that some areas' overall costs were also lowered.

Does Build Back Better Mean Better Flood Insurance?

Initially, the original Build Back Better draft provided $3 Billion to improve the flood mapping hence addressing the overall understanding of the flood hazard of communities with or without an extreme event like disasters, hurricanes, and things like that. This proposed amount intends to create a system in which federal flood insurance will be able to provide you and your community with updated flood risks based on the flood mapping.

You might be thinking, this number's too big just to address flood mapping in which we would say the Association of State Floodplain Managers stated that FEMA would need between $3 billion and $12 billion to address this concern with flood mapping across the country.

This intends to prepare for the impacts of climate change especially with the frequency of flooding and its severity. With this funding, flood hazard mapping will not only address your current flood risk but also your future flood risk. This can really be helpful especially for disadvantaged communities who don't even have a flood map. In some cases, some flood maps take 15 years to get updated.

According to E&E News, the approved bill ended up cutting down the funding for this area to $600 million. That amount is just 20% of the proposed costs needed to make sure that flood mapping will be accurate and up-to-date.

Does Build Back Better Mean Better Flood Insurance?

It's important to keep in mind that the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP) don't have a flood map for all and communities across the United States. The impact of cutting down the funding for this area can mean that your community will still have to wait a year or maybe even more just to get a flood map that reflects your current flood risks.

Additionally, what officials should know is that flood maps are crucial in understanding where the water is coming from. This also helps everyone understand where and how to build developments as this direct changes how floodwater behaves especially for vulnerable communities like those surrounded by rivers or the coasts.

The thing is flood hazard mapping isn't just for everyone to know their flood zones for flood insurance, but also to understand first the risk of flooding in the area.

Flood Insurance Premiums

Another area of flood insurance that Build Back Better wanted to address is allotting $1 Billion for subsidizing flood insurance premium cost within the federal flood market. This intends to allow low-and-moderate income households to be able to buy flood insurance from FEMA and the NFIP. 

Generally, flood insurance with FEMA and the NFIP averages at about $1,000 per year, and with the Risk Rating 2.0 Program, this number can get more expensive for policies. It's important to keep in mind that a lot of people who aren't required to get flood insurance don't buy one because of its costs.

Does Build Back Better Mean Better Flood Insurance?

This funding helps get the program running and helps people understand that the cost of flood insurance can be cheap without the risks of not getting enough coverages. A lot of homeowners would be buying cheap flood insurance, not knowing that it won't fit their coverage needs. People do this to avoid the well-known affordability costs with FEMA and the NFIP.

However, this funding for the financial assistance when purchasing a federal flood insurance policy was also cut down to $600 million as well

The Future of NFIP

Looking at the bright side of the fence, it's still a good thing that federal flood insurance will still be included in the conversation as we move forward with the Build Back Better act.

Despite the funding being significantly scaled-down, this additional funding for FEMA and the NFIP can address the issues within the federal side of flood insurance. However, this action of scaling down what the Federal Emergency Management Agency (FEMA) really needs makes one ask...

When will flood risk become a priority for the government? For now, only time can tell as the Senate modifies this part of Build Back Better.

If you have any questions on how this will impact you, about your flood insurance, or maybe your flood insurance is trash and you want to update, click below to contact us.

The Flood Insurance Guru | 2054514294

You can also access our Flood Learning Center where we try to answer your common questions about floods, flood insurance, and everything in between.

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Remember, we have an educational background in flood mitigation which lets us help you understand your flood risks, flood insurance, and mitigating your property long-term.

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Homeowners across the country are faced with a lot of insurance policies needed to sustain their property and homes. This ranges from your standard homeowners' insurance policy to other damage insurances. 

Water Backup Insurance: Do I Really Need a Flood Insurance?

Today, we want to address one of the most common questions with insurance that homeowners usually ask. Does water backup insurance cover flooding?

What is Water Backup?

First thing's first, we have to address the actual definition of what a water backup is. Generally, water backup pertains to the incident(s) when something blocks or stops the natural flow of drains from the pipes that exit your home. This could be sewer backups that are clogged due to debris, overflow of rainwater, or when a sump pump fails so it forces water into your home.

Water Backup Insurance: Do I Really Need a Flood Insurance?

Basically, the water that's coming from your home but failed to get out. This area covers things like septic systems, sump pumps, and/or sewer systems. This time of damage actually has coverage from your insurance however do you still need flood insurance when you're already covered for water backup coverage?

Is Flood Insurance Necessary?

To understand the difference between these two coverages, we first need to go back and understand what floods actually are. Generally, flooding is any incident where surface water from outside of your home inundates your property. This may be due to a storm, continuous heavy rainfall, or coastal flooding.

You might say that they should be covered within a single policy since they are both water damages to your property or home. However, it's important to keep in mind that these two things are different coverages.

Water Backup Insurance: Do I Really Need a Flood Insurance?

Even if you already have water backup coverage, unfortunately, this won't really get you covered if we're talking about flood damage. This also means that flood insurance won't cover you for water backup since most insurance companies in the industry will be considering that "Rule of Two".

The rule of two on flooding, according to FEMA, states that surface water will only be considered a "flood" if it impacts at least two acres of normally dry land or two properties within the same area. Considering that water backup has a smaller scale which only impacts a single homeowner, it doesn't really fall into the coverage of flood.

Now, let's talk about your flood insurance options.

Flood Insurance Options

The NFIP

The National Flood Insurance Program (NFIP) is purely managed by the federal government since this is FEMA's answer to flood insurance. An NFIP flood policy can get you flood coverage on both your dwelling and the contents within it.

When we say dwelling, this simply pertains to either the residential property or commercial building that you're trying to insure with NFIP and FEMA; contents will be more about the personal property and items you have inside the insured building.

There is a coverage limit when it comes to federal flood policies. Flood damage to buildings will be covered to a maximum of $250,000 for residential policies and can only go up to $500,000 maximum if it's for a commercial property. Regardless of the type of property you have written, you can expect to get a $100,000 maximum contents coverage from an NFIP policy.

READ: National Flood Insurance Program Risk Rating 2.0 Update

There's also what's called the Increased Cost of Compliance (ICC) coverage. This is a $30,000 additional coverage for your property in order to make sure that there are flood mitigation efforts made on the property according to the federal government's standards.

Generally, this can include sandbagging your property, installing floodproofing walls, raising your lowest floor from the base flood elevation levels, and putting flood openings. The labor that goes into making these mitigation efforts happen will also be covered under the ICC.

Water Backup Insurance: Do I Really Need a Flood Insurance?

There are also perks with your participating community. A participating community gets access to federal flood insurance and disaster assistance by meeting their standards on flood mitigation and disaster preparedness. The efforts put in by a community won't be unnoticed as this can help on raising your Community Rating System (CRS) score.

The CRS measures and rewards the overall flood mitigation efforts done by the community according to FEMA's standards on floodplain management. Simply put, the higher your CRS score is, the bigger the flood insurance discount you'll get from FEMA and the NFIP.

You can start enjoying your NFIP policy after a 30-day waiting period from the flood insurance purchase.

The Private Flood

If the federal flood insurance option doesn't really work for you then you can manage this new floodplain mapping through the private flood insurance market. It's important to note that this market will solely be managed and provided by private insurance companies which generally means that the red tapes FEMA and NFIP has to go through won't be there.

The first thing you'll immediately see with the private flood market is that there are significantly shorter waiting periods for your flood policy. Once you have everything settled and paid for, the wait period for the private flood carriers will follow a much shorter timeframe compared to NFIP. A private flood insurance policy can take effect on 7 or up to 14 days maximum. 

Another good thing coming out of private flood insurance is that there are no coverage limits. This means that you won't really need to stress over how to get covered for a $500,000 home since it will be fully covered by your policy. This is the same with contents coverage and you'll also get additional coverages like replacement costsadditional living expenses, and loss of use.

Fair warning, it's a known issue in the private insurance market in general that they will do moratoriums when there are risks that are too high for their comforts.

This simply means that they will either put a stop or take a break from providing flood insurance policies to a certain area that has higher risks. There's also a chance that you might not get to buy flood insurance from them once they decide to non-renew your policy.

What Really Matters

Understanding your insurance coverage from a homeowners insurance policy, renters insurance policy, water backup insurance, and flood insurance is the key to ensuring that you bounce back from any possible damages due to natural disasters or lack of maintenance. You want to get yourself a good insurance agent who can help you explain these coverages and how they differ.

If you have any questions about flood insurance, insurance coverages, or anything related to floods, click the link below to access our Flood Learning Center where we try to answer your questions on flood insurance and beyond.

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Remember, we have an educational background in flood mitigation and we want to help you understand flood risks, your flood insurance, and mitigating your property long-term. 

We're getting close to Thanksgiving, but something that we wouldn't be thankful for is all the rain and flooding that we are getting. This unpredictable weather has some areas of Washington for example in drought, but somehow the places that don't need rain got all of them at once.

Washington Flooding: Atmospheric River Hits Northwest

Today, we want to talk about the recent flooding that's going on around Washington County and also understand how this can impact flood insurance in the state especially with the Risk Rating 2.0 program taking place.

November Flooding in Washington

A category-5 atmospheric river hit the Northwestern region of the United States which caused a lot of flooding, especially in the Washington area. 75% of homes had water damage due to this event at the time of writing. The overall weather event raised the November amount to 6.83 inches of rainfall in Seattle alone as stated by Madie Kristell from the National Weather Service (NWS). The normal rainfall amount in the area during this month maxes at 6.3 inches.

About 500 properties in Whatcom County were displaced by severe flooding during this incident which prompted search and rescue efforts to ensure the safety of residents. At the time of writing, this flooding, unfortunately, cost a death on Highway 99 due to the mudslides happening in the area. and at least 2 persons are still missing.

Mudslides and flooding also caused a lot of trouble for commuters as the Interstate 5 highway was closed immediately after multiple reports of these mudslides and floods impacting the road conditions from the continuous heavy rain. 

Areas like Mount Vernon in Skagit County also received a flood warning just after receiving 2 to 4 inches of rain. Mount Vernon is also expected to get an increased amount of water as rainfall amounts can average 4 inches of rain in the next five days. This is also with the threat of major river flooding events in Skagit County as the Skagit River easily topped its major flood stage of 32 feet and is expected to go as high as 38 feet in the upcoming days of the week.

Although flash flood watch is canceled for Burlington, Sedro-Woolley, Mount Vernon, and Anacortes, Governor Jay Inslee continued to issue an emergency proclamation for fourteen other counties in Washington. The counties included in this emergency proclamation are as follows:

  • Clallam County
  • Grays Harbor County
  • Island County
  • Jefferson County
  • Lewis County
  • King County
  • Kitsap County
  • Pierce County
  • Mason County
  • San Juan County
  • Skagit County
  • Snohomish County
  • Thurston County
  • Whatcom County

These severe weather conditions also caused a lot of problems in the power infrastructure. As of 9:30 PM yesterday, at least 70,000 residents lost power in the Washington area.

Right now, we might even see widespread flooding in areas that are new the Ferndale downstream and the Skokomish River which at 16.5 feet can cause a lot of water to go into pasture lands to West Bourgault Road.

How This Impacts Flood Insurance

Federal Flood Insurance

We're currently moving into fully adopting the new Risk Rating 2.0 program from the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP) and although we're still in the first phase which mostly impacts new business flood policies, it's still important to note that everyone that has flood insurance through the NFIP will still get impacted by this weather event.

Washington Flooding: Atmospheric River Hits Northwest

First, it's important to note that if you're one of the properties that got inundated with water — regardless of minor flooding or severe flooding — this data will still be collected and considered in your new flood insurance rates with Risk Rating 2.0. This applies to both new business and renewals which is phase 2 where everyone who has FEMA flood insurance will adopt the new rating structure of the NFIP.

This flood will be taken into account because one of the variables that determine your flood risk score, which equally impacts your premium rates, is flood frequency and type of floods.

Washington Flooding: Atmospheric River Hits Northwest

Another thing you want to take into account also is the impacts when you make a flood claim during this time. Although FEMA will basically hit that hard reset button and have everyone start with a clean slate when it comes to flood claims history.

The claim variable is the new Risk Rating 2.0 system in which everyone will basically go back to zero with the Risk Rating 2.0 however once you file a new flood insurance claim under the new program, FEMA will do a 20-year lookback and count the claims you've made during that timeframe. The number of your flood claims made within the last twenty years will be your claim variable score.

Washington Flooding: Atmospheric River Hits Northwest

These are just a few of the things that will surely have an impact on your flood insurance due to this flooding that happened in Washington. You can see the overall changes in rates in Washington state through our Risk Rating 2.0 blog by clicking here.

Private Flood Insurance

This weather event and the flooding it brought isn't just going to impact those who have federal flood insurance and to be honest, the same can be said for those who are getting flood policies through private insurance carriers.

Although private flood doesn't necessarily need to follow all those changes with a rating from FEMA's Risk Rating 2.0, this type of flooding event still has significant impacts on policyholders in this market.

Washington Flooding: Atmospheric River Hits Northwest

One of the most significant impacts of flooding, when you have a private flood insurance policy, is how your increased risks due to recent floods can cause these flood insurance companies to back out from your providing your community flood insurance. Generally, this happens only on a small scale where some homeowners won't be able to buy flood insurance from the private market however sometimes these companies can go on full moratoriums.

Moratoriums in the private market generally mean that you won't have the private flood insurance option for your whole community, city, or county because of risk for flooding in the area got a significant increase in recent times. With the Risk Rating 2.0, this type of impact can be very expensive since you will no longer have the option to get cheaper premium rates through the private market.

Washington Flooding: Atmospheric River Hits Northwest

Equally, filing a flood insurance claim in a private flood policy can also reduce your chances to get flood insurance from them again. The private market is known to have the choice to non-renew your policy with them. Non-renewals are generally something we see seldom with federal flood insurance and in most cases, it doesn't happen at all. 

Regardless of how this weather event will impact you when it comes to flood insurance, we should always put first safety. One of the reasons why we strongly encourage getting flood insurance is to easily remove that worry that you may have when flooding happens where you will lose the things you value most. The right flood insurance policy can easily cover these things for you, so you want to get one.

Equally, finding safety and security for your home as well as everything inside of it is less important compared to your safety. If there is an announcement that you need to evacuate an area, we highly encourage you to do so and avoid gambling with the risks. Floods are very unpredictable and are highly deadly.

If you have more questions about this flooding event in the northwest region, how flood insurance can protect you, and how to be safe in this type of situation, click the links below to reach us or look at our Flood Learning Center where we try to answer all of your flood-related questions in just a few clicks.

Contact Us

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Remember, we have an educational background in flood mitigation which lets us help you understand flood risks, your flood insurance, and protecting your property's value long-term.

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The federal flood insurance industry has changed a lot since the Risk Rating 2.0. One of the biggest changes is how the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP) will look at flood zones. FEMA, NFIP, and mortgage lenders would have to only follow the new rating system and regulatory standards of the Risk Rating 2.0.

Are Preferred Flood Zones Gone?

As natural disasters are becoming progressively more destructive and unpredictable, we want to discuss how changes on looking at flood maps would change.

Risk Rating 2.0

The implementation of the Risk Rating 2.0 or simply NFIP 2.0 significantly impacts the rates going around with federal flood insurance. For the most part, this means that there will be an increase in rates as the new program gears towards a more accurate flood risk per property. We'd like to call this the fingerprint of your flood risk due to the nature of having an individual property getting a unique risk rating score.

This program basically says that each property will get a unique flood risk score per variable with the rating engine system in from both the legacy program from Federal Emergency Management Agency (FEMA) and new things coming into consideration.

The things that will carry over from the legacy program which will still have a bearing on your flood insurance rates are as follows:

  • Flood zone designation based on community flood maps. Flood zones also have the bearing to require flood insurance if you're in the Special Flood Hazard Area (SFHA) or High-Risk Zones
  • Flood Insurance Claims. Despite changing to a claims variable system, flood claims with FEMA may still impact your overall rates.
  • Policy assumption and policy transfer.
  • The Grandfather Rule.
  • Pre-FIRM and Newly Mapped discounts.

Are Preferred Flood Zones Gone?

The new things that will impact your rates will be from:

  • Types of flooding that your property experience.
  • Flood frequency.
  • Distance to any water source.
  • First-floor height or distance of the first livable area to grade (ground).
  • Elevation of the structure or the property itself. How high is the first floor of the property compared to the ground hence properties that are elevated are most likely to get a decrease due to this.
  • Replacement costs. This means that higher-valued homes will get an increase and lower-valued homes will get a decrease due to the overall expenses to rebuild the property due to flood damage.
  • Flood Risk Mitigation Measures made on the property.

Despite these changes to the overall rating engine systems in the Federal Emergency Management Agency (FEMA), your flood insurance policy will still follow the same amount of $250,000 for building and $100,000 in contents max for flood coverage.

The Increased Cost of Compliance (ICC) is also one of the things that will carry over from the legacy National Flood Insurance Program to this new program as well as the Community Rating System (CRS) discounts.

 

Are Preferred Flood Zones Gone?

Traditionally with the National Flood Insurance Program (NFIP) and even in private flood insurance companies, you'll see low-risk flood zones and special flood hazard areas (SFHA) or high-risk flood zones. I can even remember the time where I can tell your flood insurance premiums in these low-risk flood zones like Flood Zone X depending on the coverage amount. So you'd see immediately how these low-risk zones or preferred zones immediately impact your rates and these rates are about $400 to $600 per year.

On the other hand and you would notice with the new program through Risk Rating 2.0, flood zones no longer impact your flood insurance rates with FEMA and the NFIP. So the perks of being in a preferred zone and that preferred rate will no longer be in the picture. This means that federal flood insurance will no longer rely on a Flood Insurance Rate Map (FIRM) to say that you will get a preferred rate since flood zones don't impact rates anymore.

Are Preferred Flood Zones Gone?

On the other hand, it's a different story when it comes to the private flood insurance industry. We're still noticing a lot of private flood carriers who look into these low-risk zones and provide that same preferred rating on premiums of about $400 to $600. It's important to note also that since these insurers are managed by private companies, they don't necessarily need to follow the changes coming to federal flood insurance.

Despite these changes and flood zones only becoming more of a factor that determines whether or not you're not required to buy flood insurance for your property, it's still important to get a form of security for a property. If you want us to help you get a desirable quote from both federal and private flood insurance, click the link below to reach us.

Buy Flood Insurance Now!

We also have a flood learning center where we try to answer your frequently asked questions about flood and flood insurance.

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Remember, we have an educational background in flood mitigation which lets us help you understand your flood risk, flood zone, flood insurance, and mitigating your property long-term.

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We're officially in the last quarter of this rollercoaster of a year, and things will be changing like the turn of a season when it comes to the flood insurance industry.

10 Things You Need to Know About NFIP Risk Rating 2.0

Today, a lot of things had already happened such as Tulsa, Oklahoma topping the Community Rating System (CRS) ranking with a Class 1 Rating, Both Pinellas County in Florida and Charlotte in North Carolina moving up to Class 3, and more importantly, today marks the first phase of the new Risk Rating 2.0 program.

We want to unpack the ten things you need to keep in mind about the National Flood Insurance Program (NFIP) Risk Rating 2.0.

Effective Dates

When it comes to the Federal Management Emergency Agency (FEMA) and their updates, generally this only follows two specific dates in a year. This would go the same for their new federal flood insurance program, the Risk Rating 2.0.

Generally, the Risk Rating 2.0 will have two effective dates depending on your policy. October 1st, 2021, will impact mostly new business flood insurance policies or basically homes that are buying flood insurance for the first time with FEMA and the National Flood Insurance Program (NFIP). This is what we'd call "Phase 1".

10 Things You Need to Know About NFIP Risk Rating 2.0

On the other hand, let's say you're a homeowner who's already doing a policy with FEMA and the NFIP, then you aren't required to adapt to this new program since any renewal policy can start moving into Risk Rating 2.0 on April 1st, 2022. This is what we'd call "Phase 2" and by this time, FEMA is expecting that every policyholder will be in the Risk Rating 2.0 program.

Coverages

When it comes to coverages, it's important to note that there will be no change at the time of writing. We might see some adjustments in the future, but for now, Risk Rating 2.0 still offers the same coverage for a standard flood insurance policy.

Building coverage for residential properties will max out at $250,000 and can go as high as $500,000 for commercial properties. Regardless of the property type, there will also be a $100,000 flood insurance coverage for the contents or personal property within the insured building.

The NFIP will also retain certain programs from the legacy or previous version which are the Increased Cost of Compliance (ICC) and the Additional Living Expenses (ALE). The ICC will be an additional $30,000 coverage that your community can apply for to get excess coverage in order to further expand and/or improve flood mitigation efforts.

On the other hand, the ALE will only be available if there's a presidential declaration and this can help you cover the expenses of living in a motel as your property is getting repaired.

Wait Periods

Another thing that's staying the same with federal flood insurance is their wait periods. This covers things like the exact wait period before your policy can take effect on your insured property with FEMA and the NFIP.

Since things will be staying the same on this topic, there will still be that 30-day waiting period after the flood insurance purchase before the policy can take effect on your property. There is some exception to this rule however such as:

  • If your building is newly designated in a high-risk Special Flood Hazard Area, and you buy flood insurance within the 13-month period following a map revision: One-day waiting period.
  • If you buy flood insurance in connection with making, increasing, extending, or renewing your mortgage loan: No waiting period.
  • If you select additional insurance as an option on your flood insurance policy renewal bill: No waiting period.
  • If your property is affected by flooding on burned federal land, and the policy is purchased within 60 days of the fire-containment: Possible waiver of the waiting period.

10 Things You Need to Know About NFIP Risk Rating 2.0

Policy Assumptions

Now, this is the last remnant from the legacy program that will be staying with Risk Rating 2.0. Policy assumption or policy transfer is the ability of a property owner to pass their flood insurance policy to the new owner after the property's sale.

In the legacy program, this helps the new property owner lock in whatever the rates or flood insurance premiums and coverage among other things that the previous owner had. This changes with Risk Rating 2.0 as there might be up to an 18% rate increase when you do a policy assumption.

This increase is due to the fact that FEMA and the NFIP want the new owner to make sure that they secure a full-risk policy where the overall premium equals the risk of flooding that the property is facing.

Elevation Certificates

We're now moving into the things that are significantly changing when it comes to flood insurance pricing methodology with the Risk Rating 2.0. One of these big changes is that elevation certificates will no longer be required to determine the overall flood insurance premium rates on your property.

This means that you won't need to spend more cash on an elevation certificate to get flood insurance however it can be very helpful if you have one. An elevation certificate will be used to get a more defined and accurate representation of your property's construction such as the height of the first floor from the ground. This type of information may directly cause significant decreases to the property that you're insuring with FEMA and the NFIP.

If you have an elevation certificate, then it's best to have it sent to FEMA and the NFIP when you apply or renew your flood insurance as this can impact your rates for the better. If not, they won't require you to get one even if you're in the special flood hazard area (SFHA).

Flood Zones

Another thing that won't impact your premium is flood zones. Flood zones will now be used solely as a regulatory reference for flood insurance. In the legacy program, flood zones directly affect whether or not your premium increases with FEMA and the NFIP; this, in turn, became a burden for those who are in the SFHA or are moved into one.

In Risk Rating 2.0, flood zones will only tell FEMA if you're required to get flood insurance or not depending on your flood zone designation in your local flood insurance rate map (FIRM). We could say that being in a high-risk flood zone doesn't mean your premiums will be significantly higher than those in the low-risk flood zone.

Rebuilding Costs

The Risk Rating 2.0 will be adding a new rating factor to flood insurance and that's the overall costs in order to rebuild the insured structure. This means that more expensive houses can see higher rates compared to cheaper houses.

This also means that overinsuring a property will also increase your flood premiums with the Risk Rating 2.0. Underinsuring, on the other hand, might get lower your premiums however this means that you will not get coverage for 100% of your property.

This rating change will be the one to ask you or your insurance agents to provide the most accurate value of the property as well as how much it would cost to rebuild it in the event that the property was inundated by flood.

You can say that property characteristics in the Risk Rating 2.0 took the place of flood zones in the legacy program.

10 Things You Need to Know About NFIP Risk Rating 2.0

Property Elevation & Lowest Habitable Floor

Another new thing coming into play when it comes to assessing your property's flood risk is its elevation and the lowest habitational floor or lowest livable floor. 

Risk Rating 2.0 will also look at some flood mitigation practices made on that insured property when it comes to the final premium rate on your property. It's important to emphasize that actions like elevating the lowest livable floor of homes can really take you further away from the base-flood elevation levels in your area.

10 Things You Need to Know About NFIP Risk Rating 2.0

What's the difference between these two? Well, for one, the property elevation pertains to the overall offset or adjustment of the property compared to its original height. This mostly pertains to maybe adding a foot from the grade (ground) before the actual lowest habitational floor.

The lowest habitational floor pertains to any area of your home that is livable, so if you have a gaming area in your basement and it's underground, this will be considered as your lowest habitational floor even if you raise your property 3 feet.

It's important that the lowest habitational floor may take a good chunk on the cost of flood insurance with the Risk Rating 2.0 as this is the area where most flood damage occurs.

Types of Flooding

Another new factor coming to the Risk Rating methodology is the types of flooding that had occurred, occurs, or might occur on your property. This type of flood study will involve some cutting-edge technology to do a look back on the history of floods in your local community.

Since Risk Rating 2.0 mostly focuses on the overall flood risk that your property faces in order to determine flood policies rates, types of flood will be one of the greatest tools to help this case.

Generally, we can sort types of flooding into three separate categories: pluvial, fluvial, and coastal.

10 Things You Need to Know About NFIP Risk Rating 2.0

Pluvial flooding is any type of flood that is a result of rainfall, so you can put here flash flooding and standing water. On the other hand, fluvial flooding is also known as river flooding wherein the cause of the flood is due to a river, creek, lake, or stream rising causing water to redirect to communities. Lastly, coastal flooding pertains to floods that are caused by storm surges and coastal erosion which mostly occurs if you reside near the beach.

This risk rating factor will also take into account the flood insurance policyholder's flood frequency or generally how often your property gets flooded when it comes to finalizing the cost of flood insurance with the NFIP.

Distance to Water

Lastly, the NFIP and FEMA will also take into account the insured property's distance to a body of water. In the legacy program or the previous traditional NFIP flood insurance, this is mostly concerning how far or near your property is from the coast.

Risk Rating 2.0 changes this and makes sure that the cost of flood insurance will also take into account the property's distance to any water source. This means that if you have a dried-up creek in your backyard, you might see an increase when it comes to rates since this creek increases your flood risk.

Generally, the closer your property is to any water source, the higher your premium can be since this type of water source is generally known to bring flooding to an area.

10 Things You Need to Know About NFIP Risk Rating 2.0

Risk Rating 2.0

These are the ten things you need to know before you jump into the Risk Rating 2.0 program. Overall, this change is long overdue and we might even say that it's still not addressing the concerns of flood insurance. Credit where it's due, this is a better representation of flood insurance compared to the legacy program as we can now address the actual flood risk of a property.

If you have any more questions on Risk Rating 2.0, how to buy flood insurance, your flood insurance options, or anything related to floods, click below to reach out to us or check out our flood learning center.

Contact Us

Flood Insurance Guru | Service | Knowledge Base

Remember, we have an educational background in flood mitigation which lets us help you understand your flood risks, flood insurance, and mitigating your property long-term.

As we move into the biggest changes coming to the National Flood Insurance Program (NFIP) with the upcoming Risk Rating 2.0 Program, Tulsa City in Oklahoma clutched the game with a buzzer-beater of achievement when it comes to federal flood insurance.

Tulsa Flood Protection Above and Beyond

Today, we want to talk about what the recent Community Rating System (CRS) score change in Tulsa impacts flood insurance premiums for its locals.

Flooding and Oklahoma

At the time of writing, the South Central parts of the country including Oklahoma are facing a lot of rain as storm fronts stalled in the area. This weather condition adding up to the drought that Oklahoma is experiencing is one messy cocktail when it comes to flood.

When there's a drought, you can think of rain as water hitting hard cement. The soil won't be able to suck all this water in thus causing it to redirect to low-lying areas. In turn, this means that no one is safe when it comes to flooding.

However, this might not be a big of a concern when it comes to Tulsa since the local government and the community itself did a power move when it comes to flood mitigation by raising the city's community rating system.

But first, what is the Community Rating System (CRS)?

CRS Saves Lives Like CPR

The Community Rating System (CRS) is what we'd like to call the double-edged sword to flood insurance with the Federal Emergency Management Agency (FEMA). This is generally due to the fact this system created by the federal government encourages people to buy flood insurance and lowers the overall risk of flooding of property by rewarding a participating community with discounts to flood insurance rates.

Basically, this means that the more flood mitigation is done by a community, the higher the discount is for their policyholders. This is why both the federal government, private flood, and even our team encourages actions or measures for flood damage reduction. You get to save your property and avoid substantial damage to your safety and property while lowering your rates with your flood policy.

Tulsa Flood Protection Above and Beyond

Activities in the Community Rating System are organized in four main categories: public information, mapping and regulations, flood damage reduction, and warning and response. Stormwater management, drainage system maintenance, and floodplain development regulations

This discount can really save policyholders a lot of money since it goes up to a 45% discount if the community gets the highest class rating. Based on the flood mitigation measures made by the participating community or city, you will be categorized ranging from Class 10, being the lowest and having no discount, to Class 1, being the highest with a 45% discount on flood premiums. This type of discount is significantly better if we were to compare it to other insurance companies in the private market.

This program is significantly helpful since it allows more people to get into federal flood insurance and save themselves from empty wallets or debt especially in this COVID-19 pandemic scene.

What did Tulsa do and what reward did they achieve with this?

Tulsa Gets Rating Class 1 in CRS

Now, back on the topic of Tulsa City in Oklahoma where the local community was able to secure the Class 1 Rating with their CRS. This means that flood insurance with the National Flood Insurance Program (NFIP) and FEMA will have a 45% discount for both old and new policyholders. This is also inclusive of the standard flood insurance coverages for residential, commercial, and even rental properties. Tulsa is one of two cities in the whole country that achieve this rating score; the other being Roseville, California.

It's notable to mention that at the time of writing, Oklahoma averages about $950 when it comes to flood insurance premium rates. With this move up to a higher class rating with the CRS, flood insurance premium rates will get a discount of at least $430 based on the average.

Tulsa Flood Protection Above and Beyond

It's important to mention however that once we move into the new Risk Rating 2.0 program, we're going to see a slight increase with most areas in the state of Oklahoma. Regardless, this new CRS score will still be applicable to that. Considering that Tulsa is covered by multiple counties such as Osage County, Rogers County, Wagoner County, and Tulsa County, the 45% discount on flood premiums will impact a lot of people in a great way.

At the time of writing, about 70% of the city will be getting a slight increase of up to $10 per month (up to $120 per year) in premium rates and about 8.8% of policyholders will get more than $10 per month increase (more than $120 per year).

This type of effort of the people not only reduces the resident's overall flood damage and risk for flooding but also ensures that everyone will be able to get protection through flood insurance with FEMA and the NFIP.

What We Learned From This

Each year, flood insurance costs seem to only get higher and higher and in some areas, this can cause a lot of people to be discouraged in buying flood insurance at the expense of their safety and security against flood damage.

With programs like the Community Rating System lowering flood insurance when people take flood mitigation measures really help a lot of people and their local governments find encouragement in exerting effort into lessening the damages that flood brings to properties. Property owners don't just ensure their properties with flood insurance but start to mitigating their properties.

This type of reinforcement helps the case of all homeowners and business owners across the country especially when we're still living in a time where a lot of people underestimate how deadly floods can be.

It's safe to say that we should follow the steps done by Tulsa City in ensuring that they make the most out of flood insurance.

If you have any questions on flood insurance discounts, FEMA flood policies, flood insurance options in Oklahoma, or anything related to floods, click below to reach out to us or access our flood learning center.

Contact Us

Flood Insurance Guru | Service | Knowledge Base

Remember, we have an educational background in flood mitigation which lets us help you understand your flood risks, flood insurance, and mitigating your property long-term.

We're just a week away from the first phase of the new federal flood insurance program with the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP). The new Risk Rating 2.0 will impact properties across the country when it comes to flood insurance rates.

NFIP Risk Rating 2.0: Fears and Concerns of Flood Insurance Purchase

This new program may also bring changes not only for the flood insurance from the federal government but also the private insurance companies. It's natural to expect that a lot of property owners and consumers find anxiety, fear, and concerns with the new program.

What are these concerns?

Rate Increase

One of the biggest fears and concerns is about flood insurance rates increase with this new program.

There's a bit of misconception coming towards this specific concern. Although we're expecting some increase with the rates since there will be changes to the flood risk variable or how your rates are calculated, it's not true that everyone will get a very big increase.

Like we've covered in our previous blog, this new program is most likely to cause some increase however this is mostly due to the fact that insurance premiums will be based on a lot of variables other than flood zones.

NFIP Risk Rating 2.0: Fears and Concerns of Flood Insurance Purchase

Generally, we can expect that one of the biggest variables that may cause your rate to increase is property values. This is just one of the new things coming into play when it comes to your rate and it will fall as the costs to rebuild whatever flood damage happened to your property.

If you have a cheaper or smaller property then this could really help your case and get that rate decrease with your insurance with FEMA and the NFIP.

Will Risk Rating 2.0 cause an increase in the cost of insurance once it takes effect on October 1st? Well, there's no accurate answer however it's important to keep in mind that you will only be paying for the policy that matches your coverage and flood risk.

To further understand the new rating structure let's do a quick recap of the things coming to FEMA and the NFIP Risk Rating 2.0

Everything Risk Rating 2.0

This new program's also called equity in action as the main goal that it has is to provide a more accurate insurance cost when it comes to FEMA and the NFIP through rates and/or premiums. This goal will be achieved by using multiple flood risk factors or what is also called flood risk variables.

It's important to highlight that Risk Rating 2.0 will no longer use flood zones that are seen through flood maps as a basis for the rating. This means that being in a high-risk flood zone like Flood Zone A will only see flood insurance mandatory from a regulatory standpoint.

Here are the things that will be used to finalize your flood insurance rates with FEMA and the NFIP:

Other than the rating system, flood coverage with FEMA and the NFIP will stay the same at the time of writing. Building coverages will max out at $250,000 for residential property and will only go up to $500,000 if it's a commercial property. When it comes to contents coverage or personal property coverage, both will max out at $100,000.

So far, there will be no additional coverages like replacement costs or loss of use. Additional living expenses will only kick in if there's a presidential declaration. The other coverage you may get is the Increased Cost of Compliance (ICC) which isn't really included in a standard flood insurance policy.

Claims Process

The second thing that most property owners will be surely concerned about is the flood claims process.

Well, the good news is that there's not much change with the flood claims process itself with FEMA and the NFIP.  When it comes to completing a flood claim after a flood, FEMA will be using the same format as they are using before.

NFIP Risk Rating 2.0: Fears and Concerns of Flood Insurance Purchase

You can either call FEMA's hotline or visit their website to file a flood insurance claim after a flood. You still have to make sure that you follow their guidelines such as reporting the damages to an insurance agent or insurance company, documenting the flood loss in full detail, doing the necessary clean-up to avoid further damage, and meeting with an adjuster before you can actually have your insurance payout.

Generally, if this isn't your first rodeo from filing a claim with FEMA and the NFIP, this can be very easy. If it's your first time, there's not really much of a change to its current format. You can definitely get an informed decision when it comes to these claims from us, your agent, or your insurance company.

Mortgage's Flood Policy Rejection

Now, let's move into something that many people don't really talk about and that's the fear that your mortgage lender might not accept your flood insurance policy.

You see, when it comes to mortgage lenders, they do have certain standards that may lead to your policy getting rejected overall. Government loans like USDA loans and VA loans can be one of these loan types that most mortgage lenders reject. This means if you're doing a government loan, the mortgage lender may reject your policy due to the said loan and this is can really be concerning since it mostly falls into the lender's discretion.

NFIP Risk Rating 2.0: Fears and Concerns of Flood Insurance Purchase

There are also cases where your mortgage will not directly reject your policy, but they will have to ask you to make sure that you get more coverage for the property. This is especially the case for a policy that came from the private market or a private insurance company where coverage is more flexible than FEMA's or the NFIP's.

You can also have your policy reject if your mortgage lender deems that it won't be needed. Maybe this is because your property is not in the special flood hazard area (SFHA) or a high-risk zone or was removed from the SFHA due to the letter of map revision (LOMR).

House Closing and Policy Refund

Lastly, what if you're trying to buy this house and you already completed the flood insurance purchase however the closing didn't go through. Your policy will no longer be valid since it's set for that specific property. The biggest question you will have is that "can I get a refund?" and we totally understand since that's a lot of money going nowhere.

The simple answer is yes, you will get your refund. Generally, in this type of closing where a property closing didn't happen (also known as the Valid Cancellation Reason Code 7 or simply Code 7) in FEMA's books, you will be able to get a full refund for the premium including fees and surcharge.

It's important to note however that the cancellation and refund will only go through if FEMA received the cancellation request within 1 year of the new flood policy effective date. All you need to do is to provide the complete documentation that the closing didn't go through and the verification letter which you can also get from FEMA.

Things To Think About

At the end of the day, this update will not get a final verdict since it hasn't even started yet. FEMA and the National Flood Insurance Program (NFIP) may also add more as the Risk Rating 2.0 goes live. The real thing we should be more concerned about is making sure that you are protected especially during hurricane seasons.

We've seen how devastating these natural disasters can be, so not getting that chance to bounce back from all the loss and damages will be the bigger disaster than the actual flooding itself.

If you have any questions on understanding the level of risk for floods your property has, what the Risk Rating 2.0 means for you, what your flood insurance options are, or anything about floods and flood insurance, click below to reach us.

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Remember, we have an educational background in flood mitigation which lets us help you understand flood risks, your flood insurance, and mitigating your property long-term.

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