FAYETTEVILLE, Ark. (KNWA/KFTA) – Starting April 1, FEMA will update its flood insurance model for the first time since 1970 with what it calls Risk Rating 2.0.
A new system that FEMA says will calculate bonuses fairer for everyone
insured according to the value of their home and the flood risk of their property.
“For 67% of policyholders in Arkansas, this means they are going to pay more money and shift most of the cost burden to the riskiest areas,” says Nick VinZant, senior research analyst for Lending Tree.
A Fayetteville landlady, Nancy Mckown, has lived on West Nightingale Circle for 30 years.
Her house has never been flooded, however, because her property includes 6 feet of flood zone, her mortgage lender requires her to have flood insurance.
“When we first bought the house, flood insurance was about $300 a year,” says Mckown. “It’s steadily increased to the point where we’re paying about $30,000 more for the house, or about $1,000 more for the year.”
She says if the price continues to rise as FEMA says, she is concerned about the impact it will have on her community.
“It could cause considerable financial hardship, overtime, it could prevent you from paying a mortgage,” says Mckown.
FEMA says the price must rise for the National Flood Insurance Program because over the past 50 years it has paid out nearly $100 billion in flood insurance claims, collecting just $60 billion dollars in premiums.
Lending Tree believes increases like these are the first of many and that flood insurance will soon be one of the main things you think about when buying a home.
“This is the new reality of climate change. What we are seeing, what used to be 100-year floods, now happens every five years every 10 years,” says VinZant.
Lending Tree reports that 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 between 18% and 20% increase in premiums.