If you’re a homeowner and you have a mortgage, flood insurance is recommended because flooding can happen anywhere. Floods are the nation’s most common natural disaster but the damage is rarely covered under your homeowners or renters policy.
Flood insurance is designed to restore your property to its pre-flood condition. It’s the best way to protect your home and belongings in the event of a flood, providing financial structure and peace of mind that your home will be taken care of.
Because of the increase in natural disasters, flood insurance rates are on the rise, but there are ways to reduce how much you pay for your flood insurance policy. The first step is to assess your home’s flood zone level. The Federal Emergency Management Agency (FEMA) provides flood maps which show community flood zones. The FEMA Flood Map Service Center allows you to type your address into the tool to show your community’s flood map and better understand your risk.
I have homeowners insurance, isn’t that enough?
Homeowners insurance and renters insurance policies don’t offer protection against flooding as is. However, many homeowners insurance companies offer flood insurance, so check with your insurance agent first to see if your provider offers it.
No matter where you live in the country, it’s important to purchase flood insurance. Even if you don’t live in a high risk flood area, you’re still at risk of flood damage. In fact, 20% of flood claims are filed in low to moderate risk flood areas.
How does flood insurance work?
According to the Insurance Information Institute, “Flood insurance covers direct physical losses from floods and losses resulting from flood related erosion caused by waves or currents of water exceeding anticipated cyclical levels and accompanied by a severe storm, flash flood, abnormal tide surge or a similar situation that results in flooding.”
Flood damage isn’t covered under homeowners or renters insurance so you’ll have to get the policy separately. The maximum insurance coverage amount available from the National Flood Insurance Program is $250,000 for the structure of the home and $100,000 for the contents of the home. You can also purchase “excess” coverage which covers properties valued above those limits.
What’s covered under flood insurance?
Building property flood insurance (coverage for your home) covers things like electrical and plumbing systems, carpet, foundation walls and appliances. Personal property flood insurance must be purchased separately and covers things like furniture, clothing, washers and dryers, curtains and artwork.
What isn’t covered under flood insurance?
Damage to your home or personal property caused by moisture, mildew or mold that could have been avoided by the property owner isn’t covered under flood insurance. Damage caused by earth movement, additional living expenses like temporary housing and vehicles are also not covered under flood insurance and require other types of coverage to be properly insured.
The two types of flood insurance
National Flood Insurance Program (NFIP)
The National Flood Insurance Program gives homeowners access to federally supported flood insurance. NFIP insurance is available to anyone living in both high-risk and low to moderate-to-low-risk areas. Premiums start as low as $119 per year for low risk areas to $1,027 in high risk areas.
Flood insurance is easy to purchase directly from an insurance agent, with over 100 insurance companies who write and service NFIP policies. If you’re interested in buying flood insurance, the best place to begin is by asking your homeowners insurance provider to assist you. However, not all insurance providers offer these policies, so you may have to shop around if your provider is one of them. There is a 30-day waiting period from the date of purchase until your policy goes into effect, so keep this in mind especially if you’re a new homeowner.
Private flood insurance
Private flood insurance also covers the structure of your home and its contents from water damage, except it receives no support from the federal government. Instead, private flood insurers are for-profit companies that either rely on a reinsurer or money collected from premiums to pay out damages. The waiting time to begin coverage is only 25 days, less time than it takes for NFIP coverage to take effect.
Private flood insurance offers higher coverage limits than the NFIP, with a max rebuild limit of $500,000 or higher and is more comprehensive. The NFIP plan will only reimburse you for the depreciated amount of your flood-damaged belongings, while private flood insurance covers personal property at its replacement cost, without deducting depreciation. While private flood insurance seems to be the best option, there are a few things to consider. Firstly, it may not be available in your area, and in high-risk areas where it is available, you run the risk of higher premiums. That will make a big difference in the event that you file a claim.
How much does flood insurance cost?
The average cost of NFIP coverage is about $700 per year and varies by home and state depending on several factors:
- Type of coverage (federal or private)
- Age and build of the home
- Location and flood zone level
Click on the map below to find out the average cost of flood insurance in your state.
Data calculated by dividing the total in-force premiums in each state by number of flood insurance policies in force in each state.
How to lower the cost of flood insurance
Whether you already have flood insurance, or you’re interested in finding a great deal as a first time buyer, here are a few ways to reduce costs:
Fix expensive errors in your flood insurance premium
- Get an auditor – An auditor will help spot and correct information in your flood insurance premium that can heavily affect price like flood zone, construction date, etc.
- Check if you’re eligible for Preferred Risk Policy (PRP) rates – This is a Standard Flood Insurance Policy that offers low-cost coverage to owners and tenants of eligible buildings located in the moderate-risk B, C and X Zones in the NFIP communities. The maximum coverage for residential buildings is $250,000 and $100,000 for contents.
- Look into a community discount or Community Rating System (CRS) – This discount is calculated based on your community’s efforts to reduce the risk of flooding.
- Increase your deductible – A higher deductible will lower your flood insurance premium but will also reduce your claim payment, which means you’ll cover the difference out of pocket.
Protect your property from flood damage
Building a new home or renovating yours? Here are a few ways you could help lower your flood insurance premium and reduce potential damage.
- Relocate your home – One of the best options for protecting your home is to relocate your house to an area of your property that’s above the base flood elevation.
- Elevation – You can save hundreds of dollars on flood insurance costs by elevating above the base flood elevation. Elevating one foot above the base flood elevation can result in a 30% reduction in annual premiums.
- Utilities – Move any machinery that services your building somewhere above the base flood elevation such as an attic or a closet.
- Flood openings – One common reason why flood insurance policies are rated so severely is due to a lack of proper ood openings. Garage doors, windows, and doors don’t count unless they have flood openings installed within them.
- Basements – If you’re building a new home, back filling any excavated areas within the foundation will help you save money on your insurance premium. It can also be done post-build using pea-gravel or other suitable material to raise the interior crawl space floor elevation.
The bottom line
No matter where you live, flood insurance will help you protect your home and belongings in case of a natural disaster. Now that you know the differences between homeowners and flood insurance, the different types of flood insurance and how to effectively reduce your premiums, you can confidently protect your home from flood related damage.