FAYETTEVILLE, Ark. (KNWA/KFTA) – Starting April 1st, FEMA will update its flood insurance model for the first time since 1970 to what it’s calling Risk Rating 2.0.
A new system that FEMA says will calculate premiums more equitably across all
policyholders based on the value of their home and individual property’s flood risk.
“For 67% of policyholders in Arkansas this means they’re going to be paying more money, and they’re shifting most of the cost burden to the riskiest areas,” says Nick VinZant a senior research analyst for Lending Tree.
One homeowner in Fayetteville, Nancy Mckown, has lived on West Nightingale Circle for the last 30 years.
Her home has never flooded, however, because her property includes 6 feet of a flood zone, her mortgage lender requires her to have flood insurance.
“When we first bought the house it was about $300 a year to have flood insurance,” says Mckown. “It has steadily increased to the point where we’re paying about $30,000 extra for the house, about $1,000 extra for the year.”
She says if the price continues to increase like FEMA says it will, she worries about the impact it will have on her community.
“It could cause considerable financial hardship, in overtime, it could move you out of the ability to pay a mortgage,” says Mckown.
FEMA says the price has to go up for the national flood insurance program because in the last 50 years it has paid out nearly $100 billion in flood insurance claims, collecting only $60 billion in premiums.
Lending Tree believes increases like these are the first of many and flood insurance will soon be one of the key things you think about when buying a home.
“This is the new reality of climate change. What we’re seeing what used to be 100-year floods are now happening every five years every 10 years,” says VinZant.
Lending Tree says 33% of our Arkansans who are at lower risk will see a decrease in their flood insurance rates.
However, for those at higher risk, they could see anywhere from an 18% to 20% increase in premiums.