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.
Today, as we approach our series on the changes on federal flood insurance per state, we'll dive into the Dairyland of America itself, Wisconsin.
Wisconsin has a known history of devastating floods in the course of its history and unfortunately, this might happen again considering how climate change has also been changing the course of natural disasters across the United States and the world.
If you may recall, we've seen St. Croix County experience the dangers of deadly flash floods due to heavy rainfall which happened in June 2020. At one point over 50 roads were closed in the area due to flooding. Earlier in the same year, winter storms caused a huge disaster across the South and Midwest; this had Wisconsin experience threats of flash floods and Lake Michigan becoming a catalyst for a lot of flooding in the state.
As we face the consequences of climate change in form of unpredictable water levels of lakes, which are something that Wisconsin is surrounded by, we want to unpack the upcoming changes to your protection against floods: the National Flood Insurance Program (NFIP). The NFIP is looking to update its overall system when it comes to flood policy through Risk Rating 2.0 that will take effect starting this October 2021.
Getting a flood insurance policy for your residential property or commercial building is a great start when it comes to flood preparedness and awareness, but this won't really get you far if you fall out of the loop when it comes to the changes coming to flood insurance nationwide. Regardless if it's from the federal government under FEMA and the National Flood Insurance Program or the private flood market and private insurance companies.
We will understand what the Risk Rating 2.0 changes can mean to flood insurance and answer:
- What are the impacts?
- Who will be impacted?
- The good, the bad, and the ugly
- When will these changes happen?
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.
This doesn't mean that the cost of flood insurance will be based solely on property value hence not all expensive property or higher-valued homes will get a premium increase or lower-valued homes will automatically get a decrease. You also want to consider what both insurance company considers which is the overall flood data for your property. These things are as follows:
- Overall flood risk and flood frequencies in the community
- History of flood damage and flood loss on the property listed
- History and frequency of flood claims made in the last ten years
- Flood map designation. Is the property in a high-risk area (high-risk flood zone or the special flood hazard area) or in a low-risk area (low-risk flood zone or preferred zone)?
- Mitigation efforts made on the property. Are there enough flood openings? Is the lowest floor above the base flood elevation?
Making sure that you are knowledgeable when it comes to these things also gives you a chance to further understand if your flood coverage is reasonable when it comes to the insurance premium rates you're paying. Generally, this also helps you understand future flood risks. This is why we also highly encourage you to reach out to your insurance agent or with our team to get an informed decision before you sign those policy papers and start paying for them.
Nowadays, the biggest potential damage that we face isn't what the flood event inundates, but the concern of what our policies in flood insurance cover or the lack thereof.
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 44% or 5,669 policies in Wisconsin 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 51% or 6,577 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, 3% or 449 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 2% or 254 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 Wisconsin 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.