How to Understand Important Changes in Flood Insurance

FEMA’s risk ratings are more accurate now, which means 78% of policyholders in Hawai‘i will pay up to $120 more a year.

You may think of the Federal Emergency Management Agency as the people who come to the rescue after a natural disaster. But FEMA is also the administrator of the National Flood Insurance Program.

FEMA implemented Risk Rating 2.0 for commercial buildings and homes effective Oct. 1, 2021. With that move, the agency says that all new flood policies and renewals starting April 2021 deliver rates that more accurately reflect current flood risks – and that fair pricing will help ensure the National Flood Insurance Program will be here for generations to come.

The new individualized approach uses current data, flood models and technology to assess risk factors for individual properties including the frequency of flooding, the types of floods expected, the distance to a flooding source and the property’s elevation and cost to rebuild.

Based on FEMA’s Risk Rating 2.0, 13% of policyholders in Hawai‘i will see lower premiums this year. The other policyholders will pay more:

• 78% will pay up to $120 more a year.
• 5% will pay $120 to $240 more a year.
• 4% will pay more than $240 more a year.

Insurance companies participate in the National Flood Insurance Program by writing the policies that are purchased by property owners in Hawai‘i and nationwide. Here are some of the factors that govern the rates that you will pay:

• Buildings that are higher off the ground have lower risk, therefore the higher the first-floor height is above ground, the higher the discount.
• Home and building owners who are about to start the design and construction process – and want the lowest flood policy rates – should consider installing flood openings, elevating the building and placing all machinery and equipment on a higher floor if possible. (Click here to see FEMA’s discount guide chart)

In Hawai‘i, the high-risk flood hazard areas are in A and V Zones.

• A Zones have a 1% chance of flooding each year.
• V Zones are coastal zones that also have a 1% chance of flooding each year with additional hazards associated with storm-induced waves.

Flood insurance is mandatory for properties in the A and V Zones, unless they’re owned outright, free of mortgages and loans.

Hawai‘i Revised Statute 514B requires condominium boards to have flood insurance if their condos are in high-risk flood hazard areas such as the A and V Zones.

Todd Tamori, sales manager in Atlas Insurance Agency’s personal lines department, says Risk Rating 2.0 no longer uses general flood zones to calculate rates. The rating will be more specific to each property based on variables such as distance to flooding sources, ground elevation of the first floor, foundation type and building replacement cost value.

Use your TMK (tax map key) here to find out which flood zone you are in: gis.hawaiinfip.org/FHAT

This FEMA site lists the different flood zones: fema.gove/glossary/flood-zones

Expert Contributor: Elaine Panlilio, Account Executive, Atlas Insurance Agency