New Jersey flood insurance: What homeowners should know

Do you need flood insurance in New Jersey?

Similar to home insurance, flood insurance is not required by law. However, your financial institution might require both home insurance and flood insurance as a condition of your mortgage. Regardless, purchasing flood insurance in New Jersey could be wise, even if you're not near the shore.

Historical data from the Federal Emergency Management Agency (FEMA), which oversees the National Flood Insurance Program (NFIP), show that every county in New Jersey experiences upward of 50 flood events a year. Flood damage can add up quickly, too. FEMA suggests that a single inch of floodwater can cause a home to suffer $25,000 in damage. Importantly, flood damage is almost never covered by your home insurance policy; in order to be financially protected from a flood, you'll need a separate flood insurance policy or endorsement.

If you are unsure about your home's flood risk, you can look at FEMA's flood mapping tool to determine your home's flood zone. Your flood zone, usually expressed as a combination of numbers and letters, can provide helpful insight into your community's flood history. Other online tools like FloodFactor may be useful, as well.

Cost of flood insurance in New Jersey

How much flood insurance is in NJ  will largely depend on your home's flood risk and how much coverage you need. FEMA uses the Risk Rating 2.0 system to assess homeowners’ risk and calculate flood insurance premiums. For reference, the national average cost of a flood insurance policy in the United States is $800 per year, while the average annual cost in New Jersey is $1,274. However, your premium will vary depending on key factors, such as:

• Location
• Flood risk
• Coverage options selected
• Age and design of the home
• Deductible amount
• Amount of building/contents coverage
• Home value

What is the Community Rating System (CRS) in New Jersey and how does it work?

The Community Rating System (CRS) is an optional program offered by the NFIP. Under the CRS, communities that make an effort to mitigate flood damage and actively manage floodplains could be rewarded with a discount on NFIP flood insurance premiums. Currently, over 100 communities in New Jersey participate in the CRS and over 90 are eligible for a discount. You can check FEMA's website for a comprehensive list of participating communities and potential savings.

When to purchase New Jersey flood insurance

When it comes to purchasing New Jersey flood insurance, the sooner the better. Before major storms, many insurers issue a moratorium on flood policies, which prevents homeowners from buying them in the days leading up to a severe weather event. Additionally, most flood insurance providers have a waiting period before coverage becomes effective. For example, NFIP policies have a 30-day waiting period. Many insurance experts recommend purchasing your home and flood insurance policies as soon as you purchase your home.

How to purchase flood insurance in New Jersey

You can obtain a New Jersey flood insurance quote one of two ways: through the NFIP or through a private insurer. Both are effective ways of purchasing a flood policy. It is possible that your insurance provider either partners with the NFIP to sell policies or underwrites its own private ones. In that case, you can reach out to a licensed company representative to request a quote. If your home insurer does not offer flood insurance, you can look at the list of NFIP-affiliated flood insurance providers or seek out a private provider.

NFIP-underwritten policies generally provide two types of coverage:

• Building coverage: Building coverage offers financial protection for structural damage to your home for things like the foundation, permanent carpets, appliances, permanent cabinetry and more.
• Contents coverage: Contents coverage applies to personal property like art, jewelry, rugs, microwaves, washers, dryers and more.

Building coverage through the NFIP is capped at  $250,000, while contents coverage is limited to $100,000. If you need higher coverage limits, a private flood insurance policy may be a better fit. Experts recommend reviewing your flood insurance policy with your provider to ensure your coverage needs are met.

Flood insurance is expensive and can often be more expensive than the cost of your home insurance. If you want to save money on flood insurance, there are a few tips that may help per FEMA and NFIP experts:

• Retrofit your home to mitigate flood damage
• Raise your flood deductible
• Lower your policy limits
• Send an annual elevation certificate to your flood insurance provider

Frequently asked questions