Are you aware of how much flood insurance could cost you? You might be surprised to learn that the average cost of flood insurance from the National Flood Insurance Program (NFIP) is around $995 per year, as reported by Forbes Advisor. Contrary to popular belief, standard home insurance does not cover flood damage, leading to potential financial hardships for homeowners.
Floods are the most common natural disasters in the United States, affecting a staggering 99% of counties from 1996 to 2019, according to FEMA. Even just one inch of water can result in $25,000 worth of damage to a home, and the average payment for flood claims from the NFIP in 2019 was $52,000.
Considering the high risk of flooding in many areas, one would expect a large number of homeowners to have flood insurance. Unfortunately, that is not the case. It is estimated that a staggering 85% to 95% of homeowners do not have flood insurance, as reported by the National Association of Insurance Commissioners.
The Costs of Flood Insurance by State
The cost of flood insurance varies depending on several factors, including your location, the replacement value of your home, and the amount of coverage you choose.
Let’s take a look at the average annual flood insurance costs by state, based on a Forbes Advisor analysis of NFIP rates.
Average Cost of Flood Insurance by State
Here are the average costs of flood insurance by state:
Most Expensive States for Flood Insurance:
- Vermont: $1,610 per year
- Rhode Island
- West Virginia
It’s important to note that living in these states doesn’t necessarily mean you will pay more for flood insurance. The cost is primarily determined by the level of flood risk in your area. High-risk zones tend to have higher insurance costs compared to areas with lower flood risk.
Cheaper States for Flood Insurance:
- Florida: $624 per year
- South Carolina
Factors That Influence Flood Insurance Costs
Several factors play a role in determining the cost of flood insurance. Let’s explore the most common ones:
Flood insurance costs are primarily based on the flood risk associated with your property. Homes in high-risk areas will have higher insurance costs compared to those in low-risk zones. Factors like the elevation of your house, type of foundation, height of the first floor, and proximity to water sources are considered in determining the risk.
Characteristics of the Building
Insurance providers also consider the physical characteristics of your building, including the materials it’s made of. For example, homes with masonry walls tend to fare better in floods, leading to lower insurance rates compared to those with wood frame walls. The type of occupancy and the number of floors in the building also affect the risk assessment. Furthermore, elevating equipment such as water heaters and central air conditioning units above the first floor can reduce the risk of damage, resulting in potential discounts.
Policy Type and Coverage Amount
The type and amount of coverage you choose will impact your flood insurance costs. The NFIP offers building-only policies, contents-only policies, or a combination of both. If you opt for coverage for both the building and its contents, you can expect higher premiums compared to a building-only policy.
Similar to other insurance policies, having a higher deductible will lower your flood insurance costs. A deductible is the amount subtracted from an insurance claim. Therefore, if your home sustains $50,000 worth of flood damage and you have a $2,000 deductible, the insurer will cover $48,000. It’s essential to find a balance between premiums and the amount you can comfortably pay out of pocket in the event of a claim.
Different insurance companies have varying rates for flood insurance coverage. It’s wise to shop around and obtain quotes from multiple insurers to find the best policy that suits your needs.
Risk Rating 2.0: A New Approach to Determining Flood Insurance Costs
FEMA’s Risk Rating 2.0 is a recent development aimed at providing more accurate flood insurance costs. Prior to the introduction of Risk Rating 2.0, flood insurance rates were determined based on flood insurance rate maps. However, this model led to inaccuracies, resulting in insufficient premiums to cover flood claims and accumulating debt for the NFIP.
Risk Rating 2.0 takes into account individual property risks instead of relying solely on flood maps. Factors such as the type of foundation, elevation of the house, and distance to water sources are considered in this new pricing methodology. FEMA believes that Risk Rating 2.0 will yield more accurate flood insurance costs.
How Does Risk Rating 2.0 Affect NFIP Flood Insurance Costs?
With the implementation of Risk Rating 2.0, flood insurance costs can either increase or decrease depending on your property’s risk rating. These new rates were effective for new policies and policyholders seeking the benefit of revised rates starting from January 1, 2021. For policies renewing on or after April 1, 2022, Risk Rating 2.0 rates will apply.
While some homeowners experienced minor rate increases, the impact varies across states. To understand the specific changes in flood insurance rates for each state, it is important to consider individual circumstances.
How to Save Money on Flood Insurance
If you’re concerned about the cost of flood insurance, there are strategies you can employ to lower your premiums. Here are some effective ways:
FEMA offers discounts to homeowners who take proactive measures to reduce flood risk. Installing flood vents and elevating machinery and equipment, such as central air conditioning units and water heaters, above the first floor can make you eligible for these discounts.
Obtain an Elevation Certificate
If you possess an elevation certificate that demonstrates your home’s first-floor height exceeds FEMA’s determined level, you may qualify for lower premiums.
Opt for a Higher Deductible
FEMA flood insurance policies have separate deductibles for building and contents coverage, ranging from $1,000 to $10,000. By selecting a higher deductible, you can potentially reduce your premiums. However, keep in mind that you’ll be responsible for paying the higher deductible amount if you file a flood insurance claim.
NFIP Community Discount
Participating communities in the Community Rating System (CRS) may provide discounts based on their efforts to lower flood risk. Consult your insurance agent to see if your community participates in this program.
Do You Really Need Flood Insurance?
While flood insurance may not be mandatory for everyone, it is worth considering, given that standard homeowners insurance does not cover flood-related damages. However, in some cases, flood insurance is required:
- If you have a federally backed mortgage and reside in a special flood hazard area within an NFIP community.
- If you live in a high-risk flood area and have previously received federal disaster assistance or would like to be considered for future assistance.
- If your lender mandates flood insurance.
How to Obtain Flood Insurance
To acquire an NFIP policy, contact your home insurance agent or visit the FEMA website to find a flood insurance provider. Keep in mind that there is typically a 30-day waiting period before flood insurance coverage becomes effective. It’s advisable to purchase a policy as soon as possible to ensure adequate protection.
Private flood insurance is also available as an alternative to FEMA coverage. This option may benefit homeowners residing outside participating NFIP communities or those seeking additional coverage. Private flood insurance can be obtained as a basic policy or an excess policy to supplement existing NFIP coverage.
Higher Costs Lead to Fewer Americans with FEMA Flood Insurance
According to a report obtained by the Associated Press, approximately one million fewer Americans are projected to purchase FEMA flood insurance by the end of the decade due to increased costs. While FEMA downplayed the report, stating that it lacked context and did not include a direct analysis of homeowners’ purchasing behavior, it’s important to consider potential impacts on flood insurance affordability.
Frequently Asked Questions About Flood Insurance Costs
- Q: How much does flood insurance cost on average?
- Q: Does standard homeowners insurance cover flood damage?
- Q: What factors determine the cost of flood insurance?
- Q: Are flood insurance rates determined by the insurance company?
- Q: How do I get FEMA flood insurance?
Remember, it’s essential to fully understand your flood insurance options, evaluate your individual flood risk, and ensure appropriate coverage to protect your home and financial well-being.