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

Today, we want to talk about the upcoming federal flood insurance changes to the Bluegrass State of Kentucky. Considering how the state has been subject to flooding in recent years; one even happening earlier this Spring, we want to help residents to understand one of their flood insurance options: The National Flood Insurance Program (NFIP).

We want to unpack the good, the bad, and the ugly changes coming to federal flood insurance with the Risk Rating 2.0 that will take effect 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. 

A lot of things come into play with this new rating structure in FEMA policies. You also have to be aware that things like the history of flood claim and damages, your property's lowest grade position compared to the base flood elevation levels in Kentucky, and overall flood risk will determine the final premium you'll get with FEMA and the NFIP. 

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 provides flood coverage on buildings and personal property or contents lost to flood damage. These coverages maxes to $250,000 and $100,000 respectively. 

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

The Good

First, let's go over the good things coming with this Risk Rating 2.0. We'll show this as the green slice on our pie, and this will be the best slice you'll get with this update.

This will impact 29% or 5,524 policies for the better as it would bring an immediate decrease on flood insurance rates of more than $100 ($1200 per year) for policyholders included in this bracket.

Considering that the average flood insurance premium for the state currently plays around $1100, this can really help residents deal with federal flood insurance especially if you're one of those paying for $2000 to $3000 FEMA premiums right now.

This can also help people with lower-valued homes and lower-income communities get protected from flood damage since FEMA doesn't really pick and choose whom they provide their services to. When it comes to the flood insurance industry, it's important to remember that the private sector flood insurance industry has removed itself from entire communities due to the risk of flooding that the community has. 

The Bad

Now, let's move into the bad change or the blue slice of small increase as we'd like to call it. Yes, this means that 54% or 10,559 policies in Kentucky will have to deal with an increase in their rates starting this October.

The increase ranges from $0 to $10 per month ($0 to $120 per year). This may sound minor, but if you look at it, policyholders who are currently paying for FEMA flood insurance premiums of less than $1000 may start to swallow that 4-digit premium in October.

The Ugly

Lastly, let's talk about the ugly changes coming to residents of Kentucky when it comes to your flood insurance rates. Now, these changes are represented by the last two small slices. Although they may look small, these two packs an ugly punch. Let's talk about the pink and grey ranges.

Starting with the pink slice, which takes about 11% or 2,035 policies in the state, will get an increase on their rates ranging from $10 to $20 per month ($120 - $240 per year). 

Now, let's look at the uglier change with the grey slice. This covers 6% or 1,245 policies from FEMA in the state. If you're part of this slice, you're going to get an increase on your rates of more than $20 per month (>$240 per year). Now, it's important to emphasize that $20 is the lowest increase that the grey slice will get which generally means that you might even start getting an increase of $100 per month once the NFIP 2.0 starts to kick in October.

The rate increases with the Risk Rating 2.0 may not work out for people whose residential properties are more than $250,000. Higher-valued homes are encouraged to go through the private flood insurance market and we also would say the same especially if you're part of those who will get rate increases. You wouldn't want to pay for maybe $3,000 premium only to get covered for $250,000 on the damages to your buildings and not get replacement cost for the things you lost.

You can see the full graph of these changes here:

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 Kentucky, 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.