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.

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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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A lot of things will be changing once the new national flood insurance program kicks in next month. This will impact mostly rating as the new Risk Rating 2.0 from the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP) aims to provide a more accurate representation of flood risks when it comes to flood insurance premiums.

Will NFIP 2.0 Stop People From Buying Flood Policy in Low-Risk Zones?

Today, we want to talk about the impacts of this new program and will it stop property owners from buying a  flood insurance policy for their homes even in the low-risk zones?

NFIP Risk Rating 2.0

The new program from FEMA and the National Flood Insurance Program (NFIP) is long-awaited and long overdue. It's been 30 years since FEMA last made an update this big. Let's do a quick recap of what's changing with federal flood insurance in order to better discuss how this will impact the participating communities across the United States.

The Risk Rating 2.0 will mostly impact the rating structure within the National Flood Insurance Program (NFIP). This is because flood zones will move into a regulatory force that comes into play with flood insurance instead of directly impacting the rates.

Here are the old and new things coming into the picture when it comes to how you're rated. All in all, this will be called the flood risk score.

The remaining features are as follows:

The new things that will come with the Risk Rating 2.0 are as follows:

  • Types of flooding that your property experience. This can be either pluvial or the accumulated water due to rain, runoff of collected water that flows from higher areas; coastal which are storm surge or coastal erosion; fluvial or river floods, or sometimes a combination of these.
  • First-floor height and elevation of the structure. A new feature that determines your flood risk score is the distance between the ground (grade) from your first floor or the first habitable floor of your property.
  • Flood risk mitigation measures made on the property. Is the lowest floor above the base flood elevation? Are there enough flood openings to let floodwaters through?

It's important to emphasize that the Risk Rating 2.0 will show different rates per household, and this new program is expected to cause an increase for most policyholders since we'll be able to see the risk of flooding on our property.

Impacts on Low-Risk Zones

When it comes to flood insurance, it's no secret that when you fall into a high-risk flood zone or high-risk area, your rates can really blow of the roof regardless if you're getting it from FEMA or the private insurers. However, once the Risk Rating 2.0 starts, a lot of properties in low-risk areas will also see a higher amount when it comes to their overall premium.

Since the risk of flood damage is very detailed, we can also expect these low-risk areas to get higher rates to match the flood coverage they will get from Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP).

Will NFIP 2.0 Stop People From Buying Flood Policy in Low-Risk Zones?

The rates for these flood policies in low-risk zones will also be relatively more expensive compared to the previous program although it would retain the same building coverage and contents coverage. This also directly increases the annual premium from FEMA.

This type of change in the industry is sure to scare a lot of new property owners and new flood insurance policyholders. A good portion of the population might even avoid getting flood insurance at the expense of their security against flood water just because it's a huge burden for their wallets.

The Big Problem

It's normal to see that people will start shying away from buying flood insurance since the rates and premiums from FEMA and the NFIP will get an increase. However, the big problem here is that a lot of people from property owners, agents, and mortgage lenders don't really look at their options.

The truth is that floods don't really stop at a flood zone, so even in low-risk areas, you can still get the same flood damage or chance of flooding with high-risk zones. This is especially true in seasons like we have now where a lot of hurricanes happen. Last year, the Federal Emergency Management Agency (FEMA) found out that at least 25% of the flood insurance claims come from properties that are in low-risk flood zones.

Will NFIP 2.0 Stop People From Buying Flood Policy in Low-Risk Zones?

You really don't need to be anxious about flood insurance rates and second-guess whether or not you should buy one. You should since we're talking about protection from flooding for your home and everything inside of it.

If you're one of the people who are thinking of not getting a policy due to the higher cost of flood insurance, you should know that there's always an option outside of federal flood insurance. You see, a lot of homeowners don't really know that there are dozens of private insurance companies which offer the same protection, coverage, or most times, even more, when it comes to flood insurance.

Going Private

We've talked a lot about the comparison between federal flood insurance and private flood insurance. We've created a lot of content solely focused on how these fair up in the flood insurance market from claims, coverage, pros, and cons. For this one, we want to focus on why it's best to have a second option through a private company when it comes to flood insurance.

Since flood insurance is a separate policy from your standard homeowner's insurance policy, most of the time, and depending on your loan type, your mortgage lender will allow you to choose where to get flood insurance. This can really be a big deal especially for those in high-risk flood areas like flood zone A where flood insurance will be required with the property.

READ: The Rematch: NFIP 2.0 vs Private Flood

Private flood insurance can also have your back when it comes to building coverage and contents coverage. Most of the private flood insurance companies would also offer additional coverages like replacement costs, additional living expenses, or loss of use.

The great thing about private flood is that it costs significantly cheaper with more flexible coverage compared to federal flood insurance. This is that "get more, pay less" aspect that really helps a lot of homeowners get protected even when they're in a flood-prone area.

Simply put, there are no coverage limits with private flood hence you can get more than $250,000 for your house and more than $100,000 in flood insurance coverage for your personal property or contents within that building.

Other than the flood insurance cost, you also have a better and shorter waiting period. The NFIP can have your policy take effect on your house after the 30-day waiting period from the date of the flood insurance purchase whereas private carriers can get your policy to take effect on the insured building within 5 to 14 days maximum.

The Real Threat

We understand that seeing standard flood insurance policy rates go high can really scare anyone. We're currently going through a pandemic still and a lot of expenses are needed. However, it's important to keep in mind that the real threat doesn't fall within the policy jacket or its costs. The real threat is when that water starts inundating your house.

It's always best to make sure that you're protected through flood insurance.

If you have any questions on how to buy flood insurance from the private market, the NFIP Risk Rating 2.0 impacts, or anything about flood insurance, click below to reach us.

Get Your Flood Risk Score Here!

Buy Flood Insurance Now!

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

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When it comes to flood insurance, once you're exposed to it you also start to encounter one of the most prevalent terms in the industry: flood zone.

Many property owners would say that they're not in a flood zone because either their real estate agent, mortgage, or insurance agent would tell them so, but are you really not in a flood zone?

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Flood Zone

First, let's go over what a flood zone is. The Federal Emergency Management Agency (FEMA) who manages the National Flood Insurance Program (NFIP) or the federal flood insurance would define flood zones as an area with a specific type of flood risk according to geographical and historical data.

It's important to note that, generally, all flood insurance companies depend on FEMA's words when it comes to flood insurance. The data is dependent on floodplain devolvement in that area, floodplain status, proximity to a body of water like creeks, lakes, or rivers, history of flooding, the chance of flooding, and things like that to create an output that what we call a flood map or Flood Insurance Rate Map (FIRM).

A flood map of an area or community can show multiple flood zones since it depends on the flood risks that this area faces. These zones can range from low-risk flood zones to high-risk flood zones or special flood hazard areas (SFHA).

Now, what does it mean when people start saying that they're not in a flood zone?

 

Not in a Flood Zone?

When it comes to flood zones and flood insurance rate map (FIRM), there's no such thing as not being in a flood zone. This is a common misconception that people can get because, truth be told, every house, building, and property actually sits in a flood zone. It just depends on what type of flood zone you're in.

You see, when people say that they're not in a flood zone, this generally means that the property is not sitting in the special flood hazard area (SFHA). When it comes to the Federal Emergency Management Agency (FEMA), every house has a flood zone designation.

Most likely, when your mortgage or agent tells you that the house is not in a flood zone, what they meant is that you don't have to go face a mandatory flood insurance purchase because it's not in a 100-year flood zone.

Examples of a 100-year flood zone are flood zones A (flood zone A, flood zone AE,  flood zone AH, flood zone AR, flood zone AO) or even a flood zone V which is the coastal flood zone.

What this probably means is that when it comes to flood zone maps, the property is sitting on a flood zone C, flood zone B, or even flood zone D. Most likely, this may show up as a flood zone X and the reason why they say that you're not in a flood zone is that your flood insurance won't be required since you're in low-risk flood areas.

The Problem with Low-Risk Flood Areas

Now, it's easy to find peace of mind when you realize that you're in a low-risk flood zone where the requirement for flood insurance isn't really there at all. The problem with these zones is that 30% of the flood insurance claims come from this area according to FEMA and the National Flood Insurance Program (NFIP). Homeowners that say that they're not in a flood zone are the ones that comprise that 30% and we're only talking about FEMA's numbers.

Being in a low-risk flood zone doesn't really mean that you won't get flooded like the high-risk flood zone. There might be minimal flood hazards in the area which is why it shows that you're in these zones, but there are varying reasons why a property owner in a flood zone X can be flooded.

We've also seen low-risk zones get flooding damage due to flash floods and other severe floods throughout the year.

This is why we encourage everyone to secure flood insurance policies for their residential property or even commercial flood insurance for their business. The chances of flooding can be very low one day then skyrocket the other day, given the right circumstances. 

So when you hear someone tell you that you are not in a flood zone or they are not in a flood zone, take time to reach out to your local floodplain management standards and officials or your insurance agent to really identify what your flood zone is. It's better to be safe than sorry when the risk for flooding becomes too high and loss from flood damage becomes too unbearable.

If you have any questions on flood zones, maybe you want to know what flood zone you're in, what your flood insurance options are, or anything about a flood. Reach out to us through the links below.

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.

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

The Flood Insurance Guru | Delaware Flood Insurance: New Federal Flood Insurance Risk Rating 2.0

Today, we're taking a trip to another state in the coastal area, the Blue Hen state of Delaware. Considering how there's a lot of talk about how flooding can devastate the state as well as the threats of flooding that this hurricane season will bring, we want you to join us in preparing for this type of disaster.

Let's jump into the good, the bad, and the ugly changes that FEMA's National Flood Insurance (NFIP) Risk Rating 2.0 or also known simply as NFIP 2.0 when it comes to flood insurance purchase and rates.

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 flood insurance premiums would now be based on the value of your property or home starting this October 1st. 

It's important to note that a lot of participating communities will be impacted with this new rating system and policyholders in the National Flood Insurance Program will have to adopt these new ratings in time. Considering that this will impact not just flood insurance policies, flood insurance coverage, but also cost of flood insurance itself, it's important to be ready for any possible impacts this may cause you in the future.

The Flood Insurance Guru | Delaware Flood Insurance: New Federal Flood Insurance Risk Rating 2.0

When it comes to the rate changes happening across the country, you're going to see these colors in ranges which are the green, blue, pink, and grey range bars. Now, each of these colors represents the good, the bad, and the ugly changes coming to each state.

Now, let's talk about how these colors will change federal flood insurance in Delaware once this update kicks in.

The Flood Insurance Guru | Delaware Flood Insurance: New Federal Flood Insurance Risk Rating 2.0

The Good

First things first, let's talk about the good changes coming with this Risk Rating 2.0 which is showed by the green range bar you see in these reports. This is what we call a good change because it will decrease your flood insurance rates per month by more than $100 ($1200 per year).

This change is expected to impact 38% or 9,847 policies come October. Considering that Delaware averages at about $750 in NFIP premiums, this change will really help you save a lot by the time the NFIP 2.0 kicks in.

This can be very helpful for higher-valued homes since they're the ones with the possible higher premiums with the National Flood Insurance Program. For those with what is considered lower-valued homes can really find better protection for their properties with this new update on flood insurance rate with FEMA.

The Bad

Now, let's move into the bad change which takes up most of the changes coming to Delaware. This is presented through that light blue bar and 52% or 13,531 of FEMA policies will be experiencing an increase in flood insurance rates.

Policyholders can also maximize the perks that come with being one of the communities that participate with the NFIP. This can come in form of subsidized rates through the Community Rating System (CRS) which can help lower these rates despite having some increase. There's also the ICC or Increased Cost of Compliance where the federal government itself will help you finding a methodology when it comes to better mitigation efforts in reducing, if not preventing flood damage on your property.

The increase will start at $0 and maxes to $10 per month ($0 - $120 per year) for these properties. This means that starting October, you're going to start paying $870 on average for your federal flood insurance premiums.

The Ugly

Lastly, let's cover the last two colors we have from Risk Rating 2.0: the dark blue, the ugly change, and the grey range, the uglier change.

Now, both of these would fall under what we'd like to call the ugly change because it's going to bring an increase in rates once the update kicks in, and it's going to be a drastic change when it comes to flood insurance.

The pink range is composed of 8% or 2,190 FEMA policies in Delaware. This is still an ugly change since the increase will now range from $10 minimum to $20 maximum per month ($120 - $240 per year). This means that if you're already paying for the average premium from FEMA right now, it's going to reach that $940 to $1000 mark easily.

This can be very difficult to manage especially for houses that sit close to a water source like rivers, creeks, and lakes. Households will have to either move into the private flood insurance or reallot their budget to accommodate these new rates.

The grey range is an even uglier change especially for the 2% or 581 FEMA flood insurance policyholders since the increase will start at $20 per month ($240 per year). This change significantly blows your premiums out of the water since the average for your flood insurance will start at $940 at the lowest. 

A full graph of these changes can be seen below:

The Flood Insurance Guru | Delaware Flood Insurance: New Federal Flood Insurance Risk Rating 2.0

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.

 

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 Delaware, 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.

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