A lot of things are changing with the federal side of flood protection as the new Risk Rating 2.0 from the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP). Today, we want to talk about something that's always been changing in the flood insurance industry and how these flood insurance rate maps will impact your flood insurance.
Flood Zones in Risk Rating 2.0
In our current time, a lot of things are changing and will continue to change. One of the things that are long overdue and was in dire need of an update, if not overhaul, was the federal flood insurance. In the legacy program or the NFIP 1.0, there are significant things that are supposed to be addressed when it comes to flood risks and the system falls flat on its face when it comes to these.
It's well-known that the legacy did its part in protecting people from flood loss and devastating flood damage, but the thing is flood insurance — like any other insurance policy — are cautious proactive means. Protecting the insured was never reactive when it comes to very uncontrollable and volatile situations like a flood event, and this is something that the Risk Rating 2.0 greatly improves on.
The new Risk Rating 2.0 program addresses flood insurance based on the unique flood risks your property is facing. This means that they will look at flood risk variables such as elevation, frequency of flooding, construction, claims history, and replacement costs, to name a few, in understanding your property's flood risk and thus flood insurance premium.
This is what we call "your fingerprint of flood risk" since every house or building will have a unique risk rating score with the new flood insurance program.
It's important to keep in mind that Risk Rating 2.0 will only look at flood zones for regulatory purposes. This means flood insurance rate maps (FIRM) and the flood zone changes happening with it will only be used to determine whether or not a property is required to carry flood insurance or not.
We'll move past being concerned with your property's location when it comes to your flood insurance rates. Basically, the rating flood maps of old are out and the regulatory flood maps of Risk Rating 2.0 is the new standard.
Today, we discuss the good, the bad, and the ugly changes with the flood map updates to the Golden Valley County, Ryegate, and its respective communities that will start to take effect this November 5th, 2021. We want to focus on how many properties will be impacted by this new floodplain mapping, how many properties are moving into high-risk flood zones, how many are being removed from it, and how many are going deeper into the special flood hazard areas (SFHA).
The first flood zone movement we'll discuss is what's called an "in to out" movement.
In the NFIP legacy program, this change meant that these properties will get lower flood insurance rates due to the lower flood hazards that your property faces. This also meant that you'll no longer be required by your mortgage or the government to carry flood insurance on your insured property. Since flood zones in the new Risk Rating 2.0 program will no longer impact your rates, this only means that you will no longer be required to carry flood insurance.
This movement will impact only 12 properties in Golden Valley County and Ryegate City. Generally, we call this a good change even before Risk Rating 2.0 came into the picture because this meant that the property is being removed from a high-risk flood zone and moved into a low-risk flood zone.
Is this good enough of a reason to NOT carry flood insurance?
At the surface, this may look like a good deal to no longer be required to carry flood insurance however at its core, not having flood insurance is generally a bad idea even if you're being moved to a low-risk area like Flood Zone X. This is because it's only a low-risk zone that you're moving in, not a no-risk flood zone. Simply put, you're still not exempted from being flooded even if your property sitting in a low-risk flood zone.
Now, let's move to the bad changes coming with this new flood map update. FEMA calls this an "out to in" movement since the flood insurance rate map will take properties that are in the low-risk zones and place them into high-risk zones.
There are 115 property owners that will experience this movement in the upcoming floodplain map. This means that if you're impacted by this bad change, the regulatory standpoint of Risk Rating 2.0 when it comes to flood zones will kick in due. Property owners that are included in the out-to-in movement will now be required to carry flood insurance regardless if they insured residential properties or commercial ones.
High-risk areas like flood zone A or 100-year floodplain generally mean that the properties in this area will have a 26% chance of floodwater inundating during a 30-year mortgage.
Lastly, we have the ugly changes coming to Golden Valley County and its cities like Ryegate City. The ugly change is something that FEMA calls an "in to in" movement. Generally, this indicates that the impacted properties are very likely to get inundated by any flood event. Unlike low-risk flood zones, these flood zones experience more devastating floods due to their proximity to a water source.
This is because this will impact properties that are already in the SFHA and will be mapped into a higher-risk flood zone. We could also say that this is like moving your insured property from a flood zone A to a flood zone AE.
About 80 properties are expected to experience this in-to-in movement on the flood maps. Just like the bad change or out to in, this also means that you will be required to carry a flood insurance policy for your property. This number may be due to the base flood depths getting worse due to multiple factors.
Now that we have covered the good, bad, ugly changes, and how this can impact your flood insurance purchase, let's talk about your flood insurance options in Ryegate, Montana.
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.
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.
There are also perks with your participating community in Sibley. A participating community gets access to federal flood insurance and disaster assistance, but more importantly, you also get to work with your community 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 costs, additional 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.
At the end of the day, the choice of where you'll be getting flood insurance depends on you. What's really important is that you know your flood risks and have enough protection from all possible outcomes of a flood event such as flood loss and flood damage.
Click the link below to access our Flood Learning Center where we try to answer your questions on flood insurance and beyond.
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.