How much does flood insurance cost?

How much is flood insurance?

The average U.S. homeowner pays an average of  $888 per year for a flood insurance policy from the NFIP, but prices might change if you choose to go through a private provider instead. NFIP coverage limits are capped at $250,000 in dwelling coverage and $100,000 for personal property; if you need higher coverage limits, then a private flood insurance policy may be better suited to your needs.

If you have a mortgage or other type of home loan, your lender will require you to buy a flood insurance policy if your home is in a Special Flood Hazard Area (SFHA), Coastal Barrier Resources System (CBRS) or Otherwise Protected Area (OPA). Flood policies are generally required to be paid in full up front, either by you directly or out of your mortgage’s escrow account.

How are flood insurance rates calculated?

Regardless of whether you opt for an NFIP policy or a private one, just like home insurance, there are a couple of different factors that can affect the cost of your policy.

Flood risk

The first and perhaps most significant factor that determines the cost of flood insurance is the historical risk of flooding in your region. While every home has a level of flood risk, only those in moderate- to high-risk areas are typically required by a mortgage company to carry flood insurance. However, there are some exceptions to this rule. For instance, Florida homeowners insured with state-backed Citizens must carry flood insurance, regardless of their flood zone.

Even if you are in a low-risk flood zone, you still have a small risk of flooding. One in three flood insurance claims are in low- to moderate-risk areas, according to FEMA. Since flood insurance is based on risk, the more likely flooding is in your area, the more your flood insurance is likely to cost. To find how much of a risk flooding is in your area, check out FEMA’s flood maps for your region.

Where your home is specifically located within a floodplain also plays a role in how much flood insurance is. Your home may be located within a floodplain, but your flood insurance could be lower if your house is built on a hill or other elevation. This is because the elevation reduces the risk of flood damage, thus reducing the risk that an insurance company will have to pay out a claim.

Home age and construction

Flood insurance providers also pay close attention to how your home is constructed and how old it is. Older homes built before modern construction materials and techniques may be more vulnerable to damage caused by flooding and could incur additional expenses —  such as custom lumber milling — to repair. Some modern building techniques may help mitigate flood damage, like including floor openings for water to drain out more quickly.

Type of coverage

There are only two coverage options on an NFIP flood insurance policy: building coverage and contents coverage. Choosing a policy with no contents coverage will likely be cheaper than choosing a policy that includes both coverage types, but could leave you financially vulnerable if a flood destroys your home and everything in it. You may be able to add more coverage types with a private provider, like additional living expenses and scheduled property coverage, but these will likely raise the cost of your coverage.

Coverage limit and deductible level

Generally, the more coverage you purchase, the higher your premium will be. The higher your coverage, the greater the risk to the insurance company. Your deductible, which is the amount of money you will pay out of pocket if you file a claim, also impacts your premium. Typically, the higher your deductible, the lower your premium will be. With a higher deductible, you assume a higher amount of financial responsibility in the event of a claim, thus reducing the financial burden of the insurance provider.

Type of policy

Depending on your home’s location, you may qualify for an NFIP Preferred Risk Policy (PRP). If your home is located in a low-risk flood area, you may be able to purchase valuable PRP flood insurance coverage at a lower price. Standard policies are often the only option for homes located in moderate- and high-risk flood areas.

Insurance company

Historically, flood insurance was only offered by the NFIP. Although various insurance companies were able to facilitate the purchase of NFIP policies, the rates were standardized regardless of what company you purchased coverage from. However, within the last several years, private insurance companies have begun to sell and underwrite their own policies. Now, with more companies selling flood insurance, you can get several flood insurance quotes to compare coverage types and premiums, just like you can with homeowners insurance quotes.

What does flood insurance cover?

Many people use the word “flood” to describe any kind of water damage, but floods are distinct weather events and flood insurance is designed to cover a particular set of circumstances.

Flood insurance covers damage caused by weather-related floods, including heavy rainfall, storm surges and overflowing bodies of water. Many homeowners will use the term “flood” when discussing other types of water damage, like broken pipes and water backup. If heavy rains cause a sump pump to fail and water backs up into your basement, that is not a flood. Coverage for damage caused by these instances may be covered on your homeowners insurance, depending on the coverage types and endorsements you have.

According to the NFIP, flood insurance includes the following.

Building coverage

• Plumbing and electrical systems
• Water heaters and furnaces
• Cooking stoves, refrigerators and built-in appliances (like dishwashers)
• Permanently installed carpeting
• Permanently installed bookcases, cabinets and paneling
• Window blinds
• Foundation walls, anchorage systems and staircases
• Detached garages
• Fuel tanks, well water tanks and pumps and solar energy equipment

Contents coverage

• Personal belongings such as furniture, electronic equipment and clothing
• Curtains
• Washer and dryer
• Portable and window air conditioners
• Microwave oven
• Carpets not included in building coverage (such as carpet installed over wood floors)
• Valuable items such as furs and original artwork (up to $2,500)

Keep in mind that these coverage details are from the policies offered by NFIP. A private flood insurance company may have different coverage types, with different coverage options and limits.

Is flood insurance required?

While flood insurance might not be universally mandated by law, its necessity is often dictated by the location of your home and the terms of your mortgage. Particularly for residences situated in areas prone to moderate to high flood risks, lenders may stipulate flood insurance as a condition of your loan agreement. It's prudent to scrutinize your mortgage or refinancing documents to confirm compliance with any insurance stipulations.

In specific cases, such as for homeowners insured through Citizens in Florida, flood insurance is a requirement, with the mandate being implemented in stages. The requirement for Citizens policyholders to carry flood insurance hinges on various factors, including the location within Florida and the property's valuation. Understanding these nuances can help you better navigate the landscape of flood insurance, ensuring that your property is adequately covered against potential flood-related damage.

How to save money on flood insurance

You can explore several steps to protect your property from flood damage, and these actions could help you pay less for flood insurance each year. Below are some of the top recommendations from the NFIP.

Some of these steps could be relatively expensive and entail major home renovations. Getting quotes for the work and asking how much the changes could reduce your flood insurance premium might help you decide if you will save enough to justify the cost of taking these measures. But keep in mind that these steps don’t just serve to reduce your flood insurance premium — they could save you from the heartache, stress and emotional fallout from flood damage.

Elevate your utilities

Elevating electrical panels, heating and cooling systems, water heaters and other utilities on a platform above the base floor elevation of your home can help reduce the likelihood of damage from a flood and thus save you money on your premium.

Elevate your property

It may seem like a big undertaking, but the NFIP calls this action the fastest way to reduce flood insurance costs. In fact, if you live in a high-risk flood zone, you might save hundreds of dollars every year for each foot that your home is elevated above your community’s base floor elevation. Elevating your home above the level of flood waters means that it is far less likely to flood and reduces the risk that an insurance company will have to pay out a claim. Obtaining an elevation certificate, which plots your home’s specific elevation on your property, could drastically reduce your premium. If choosing this route, an elevation certificate would need to be obtained every year around the renewal date to assess the best possible flood insurance rate.

Maintain or install flood openings

For insurance purposes, the NFIP requires all new home building and basement renovations in high flood-prone areas to have flood openings below the lowest elevated floor of the home — typically on at least two exterior walls. If your home does not have flood openings, adding them could lower your premium. These openings allow water to drain out of your home, potentially reducing the amount of damage that could happen.

Fill in your basement

Being below ground level, basements are at high risk for severe flood damage. Water can rush in and has no way to drain out. Although filling in a basement may seem like a drastic step, it could save you quite a bit of money on your flood insurance. If you are a new homebuyer and looking at homes in flood plains, purchasing one without a basement might be a prudent financial choice.

Increase your deductible

Flood policy deductibles can vary widely depending on your policy, provider, circumstances and preferences. Typically, the higher your deductible, the more money you will have to pay out of pocket if you file a claim. Just like with homeowners insurance, a higher deductible generally leads to lower premiums because you agree to cover more of the costs of repairs in the event of a claim, thus reducing the financial risk to the insurance company. Because you will be responsible for paying your deductible if you file a claim, make sure you choose a level that makes financial sense for you. Your deductible should always be an amount of money you can comfortably pay out at a moment’s notice.

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