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 Louisiana and how they can impact your flood insurance in the future.
Today, we want to talk about the Pelican State of Louisiana and the upcoming change with the federal flood insurance program. Considering how the state faced a lot of floods especially in recent years. If we even just look at what happened this past few months with the flood in Baton Rouge, you'll start to have another good reason to secure your flood insurance on your property.
Let's talk about the National Flood Insurance Program (NFIP) Risk Rating 2.0 and the good, the bad, and the ugly changes it will bring to flood insurance for residents of Louisiana. These changes will start 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.
Residential properties might be the biggest receivers of these upcoming changes since generally individual properties will be assessed through this new rating structure in the National Flood Insurance Program. This simply means that a lot of things will be put into play when determining if you're going to get price increases or decreases with your flood insurance premiums or flood insurance rates.
You want to consider things like flood insurance claim history, flood damage history, risk of flood in the community, source of flood or water sources like rivers, creeks, reservoirs, and things like that that determine the overall rates for flood insurance cost 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 NFIP continues to provide flood insurance coverage for damages to buildings and personal property that maxes to $250,000 and $100,000 respectively. If you're planning to get your flood policy from FEMA and the NFIP, you might want to start now as we're early in the hurricane season since there's still that 30-day waiting period before you can have your policy take effect on your insured property.
Let's unpack these and see what they mean for flood insurance.
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 change will impact 20% or 101,174 federal flood policies. We call this a good change because it will bring an immediate decrease in rates starting this October. The decrease can be more than $100 ($1200 per year). Since the current average for Louisiana flood insurance with FEMA is about $707, this can really help policyholders manage their federal flood insurance once the NFIP 2.0 kicks in.
Now, let's move into the blue slice that covers most of the policies in Louisiana. It's important to note that this blue slice is what we consider the bad change because it will bring an increase in flood insurance rates.
This will impact 70% or 343,246 policies in the state which will get an increase that ranges from $0 to $10 per month ($0 - $120 per year). This can be very significant of a change especially if you are being moved to a zone where flood insurance is required.
Lastly, we want to cover the last two small slices you'll see with these changes. The pink and grey slices equally represent an ugly change to flood insurance in Louisiana. Let's figure out the difference between the two.
The pink slice will cover 7% or 34,352 policies and will cause you an increase that ranges from $10 to $20 per month ($120 - $240 per year). This can easily put you at that $1000 flood premium once the changes kick in October.
On the other hand, the grey slice will be an uglier change between the two because the 3% or 17,159 residents will start to get that increase of more than $20 per month (>$240 per year) on federal flood insurance rates. This also means that you might face more than a $100 per month increase depending on the value of your property.
These price hikes or rate increases may be something that you need to consider especially if you have private flood insurance in mind. You don't really want to pay for a $2,000 up to $4,000 flood insurance premium when you only get to be covered for $250,000 on your $500,000 house.
The private flood insurance market can get you the best bang for the buck when it comes to the cost of flood insurance. You also have that short waiting period with the private sector however, with fair warning, private insurers do have this power to go on moratoriums or non-renew your policy just because of the flood risk on your community, area, or property is just something that doesn't sit well with them. Simply put, they have the option to pick and choose who they provide their services to.
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 Louisiana, 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.