As we dive deeper into the hurricane season, we also have to prepare for the upcoming changes to flood insurance across the United States. The Federal Emergency Management Agency (FEMA) is rolling out changes when it comes to flood insurance rates across all states in the country.
Let's saddle up as we lasso the changes coming to federal flood insurance in the Cowboy State of Wyoming.
Wyoming has a colorful history of floods. Just like the other states, when we travel back to the 1900s, we're going to see a lot of flood events that impacted the state. For this one, we want to focus on the two more recent floodings which happened in Wyoming.
In June 2010, rain and rapid snowmelt caused massive summer flooding in Fremont County. This disastrous event alone caused about $7 million in damages. This is why we really highlight the threats of these spring runoff. In the same month five years after, the state also witnessed devastating flash floods due to torrential rain and thunderstorms in Niobrara County.
This is why it's important to understand your flood insurance since this is the only protection you can get against such force of nature. Getting flood insurance policies for your properties both residential property, commercial property, and contents or personal property is one great start in making sure that you're prepared and protected from flood damage. However, this can only get you far especially if you're not up-to-date when it comes to the changes coming to flood insurance.
We've seen this happen in federal flood insurance where some policyholders would be caught off guard with the price hike on their rates since they didn't follow the latest flood map updates. There are also private companies suddenly doing moratoriums and nonrenewing leaving homeowners without flood insurance.
Today, we want to focus on the National Flood Insurance Program (NFIP) as the landscapes of federal flood insurance will change with the Risk Rating 2.0. We will understand what the Risk Rating 2.0 changes can mean to flood insurance and answer:
The Risk Rating 2.0 is expected to drop on October 1, 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.
It's important to note that the federal government, FEMA, and the National Flood Insurance Program won't solely rely on the property values when calculating the flood insurance premium they'll give for each homeowner or policyholder.
This doesn't mean that all expensive property or higher-valued homes will be the only ones to experience rate hikes and lower-valued homes up to middle-income policyholders will be the only ones to get a decrease in their flood insurance rates. The pricing methodology will also rely on the flood data such as:
- Overall risk of flooding and flood frequency in your community
- History of flood damage and flood loss on the property
- History and number of legitimate claims for flood insurance made in the last ten years
- Mitigation projects made on the property. Are there flood openings? Is the lowest floor above the base flood elevation?
- Flood map data. Are you sitting in a designated high-risk flood zone?
- Possible flood hazard and other flood risk variables. How far is the nearest water source or body of water? Is the area prone to coastal erosions?
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.
Let's start this one with good news or what you'll see in our graph as a green portion. This will affect 33% or 561 policies in Wyoming and generally reflects the good change because there will be a decrease in flood insurance rates for those who are included in this portion.
The decrease in FEMA policy rates will be more than $100 ($1200 per year). This type of change can really help those who aren't getting in the private flood market or want to continue their policies with FEMA.
If there's good news, there is also bad news. This is represented by that blue portion in the graph which is composed of 60% or 1,017 policies from FEMA in the state.
This is what we call a bad change for these policyholders since there will be a small increase in flood insurance rates starting this October. Once the Risk Rating 2.0 takes effect, there will be an increase ranging from $0 to $10 per month ($0 - $120 per year).
This means that you might not experience any change will flood insurance when you fall to that $0 or you can get up to a $10 increase.
Lastly, we want to talk about the ugly changes coming with the Risk Rating 2.0. This will be shown by the pink and grey portions respectively. Both of these will still deal with getting you an increase in the rates you have with FEMA.
Starting with the pink portion, 4% or 76 policies in Wisconsin will get an increase ranging from $10 to $20 per month ($120 - $240 per year).
Whereas the grey portion will cover only 3% or 51 policies in the state. Despite having a small percentage, it's important to note that this will have the most drastic increase of more than $20 per month (>$240 per year).
You can see the full pie graph of these changes coming to Wyoming 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 Wisconsin, 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.