If your home is located in or near a flood zone, finding the right flood insurance policy may be a necessity to protect your finances from a costly disaster. after all, just one inch of water could cause $25,000 in damage to your home, according to floodsmart.gov. Unfortunately, if you don’t have a separate flood insurance policy, you’ll pay the cost outright, since a flood is an excluded peril on standard home insurance policies.
The most recent data provided by the Federal Emergency Management Agency (FEMA) shows that the average flood insurance policy is $700 a year. How much you’ll pay for flood insurance depends on a number of factors, including your home’s flood zone, the amount of coverage you need, and certain home features. Learning more about flood insurance rates, as well as the components of the policy, may help you understand if flood insurance is right for you.
Reading: How much is flood insurance a year
factors that determine the cost of flood insurance
us average uu. A homeowner can pay around $700 per year for a flood insurance policy, but as with other forms of insurance, your premium will vary based on your individual qualifying factors. Although the best way to know how much your flood insurance will cost is to get a quote, understanding the factors that determine your premium could help you control your premium as much as possible.
if you have a mortgage or other type of home loan, your lender will require you to purchase a flood insurance policy if your home is in a special flood hazard area (sfha), coastal barrier resource system (cbrs ) or otherwise protected area (opa). Flood policies are generally required to be paid in full, either directly by you or from your mortgage escrow account.
The first and perhaps the most significant factor determining 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 generally require flood insurance. 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 a flood is in your area, the more likely your flood insurance will cost. To find out how much flood risk there is in your area, check out FEMA’s flood maps for your region.
The specific location of your home within a floodplain also influences the cost of flood coverage. Your home may be located within a floodplain, but your flood insurance could be lower if your home is built on a hill or other elevation. This is because elevation reduces the risk of flood damage, which reduces the risk of an insurance company having to pay a claim.
age and construction of the house
Flood insurance providers also pay close attention to how your home is built and how old it is. Older homes built before modern building materials and techniques may be more vulnerable to flood damage and could incur additional expenses, such as custom lumber sawing, to repair. Some modern construction techniques can help mitigate flood damage, such as including openings in the floor so water can drain more quickly.
There are only two coverage options in a flood insurance policy: building coverage and contents coverage. Choosing a policy without contents coverage is probably cheaper than choosing a policy that includes both types of coverage, but it could leave you financially vulnerable if a flood destroys your home and everything in it.
coverage limit and deductible level
Generally, the more coverage you buy, the higher your premium will be. The higher your coverage, the higher the risk for the insurance company, which takes on more risk with higher coverage levels. Your deductible, which is the amount of money you’ll pay out of pocket if you file a claim, also affects your premium. Generally, the higher your deductible, the lower your premium. With a higher deductible, you take on more financial responsibility in the event of a loss, reducing the financial burden on the insurance provider.
Depending on the location of your home, you may qualify for a National Flood Insurance Program (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.
Historically, flood insurance was only offered by the National Flood Insurance Program (NFIP). Although various insurance companies were able to make it easy to purchase NFIP policies, rates were standardized regardless of the company you purchased coverage from. however, in recent years, private insurance companies have begun to sell and underwrite their own policies. Now, with more companies selling flood insurance, you can get multiple flood insurance quotes to compare coverage types and premiums, just like homeowners insurance quotes.
risk rating 2.0
In October 2021, FEMA introduced a redesigned NFIP rating strategy called Risk Rating 2.0. previously, flood rates were largely determined by where your home is located within a floodplain and its elevation.
Risk Rating 2.0 is designed to more accurately determine rates based on a variety of factors. The new classification system includes factors such as the frequency of flooding, the type of flood risk in a given area (storm surge, river overflow, heavy rain, etc.), distance to a water source, cost of reconstruction of your home and elevation of your property.
The more varied rating factors are designed to help more accurately rate the risk of flooding in a given location. Risk Rating 2.0 is designed to help reduce the disparity between flood insurance rates for lower value homes and higher value homes.
what does flood insurance cover?
Many people use the word “flood” to describe any type of water damage, but floods are different weather events and flood insurance is designed to cover a particular set of circumstances.
Flood insurance covers damage caused by weather-related flooding, including heavy rain, storm surge, and overflow of bodies of water. Many homeowners will use the term “flooding” when talking about other types of water damage, such as broken pipes and standing water. If heavy rain causes a sump pump to fail and water collects in your basement, that’s not a flood. Coverage for damage from these events may be covered in your homeowners insurance, depending on the types of coverage and endorsements you have.
according to the nfip, flood insurance covers:
- plumbing and electrical
- water heaters and ovens
- ranges, refrigerators, and built-in appliances (such as dishwashers)
- permanently installed carpeting
- bookcases, cabinets and panels for permanent installation
- foundation walls, anchoring systems and stairs
- detached garages
- fuel tanks, well water tanks and pumps and solar energy equipment
- personal items such as furniture, electronic equipment, and clothing
- washer and dryer
- portable and window air conditioners
- microwave oven
- carpet not included in building coverage (such as carpet installed over hardwood floors)
- Valuable items like furs and original artwork (up to $2,500)
Please note that these coverage details are from the policies offered by NFIP. A private flood insurance company may have different types of coverage, with different coverage options and limits.
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 main recommendations of the NFIP.
Some of these steps may be relatively expensive and involve major home renovations. Getting quotes for the job and asking how much the changes might reduce your flood insurance premium can help you decide if you’ll save enough to justify the cost of taking these steps. But keep in mind that these steps not only serve to lower your flood insurance premium, they can save you from the heartache, stress, and emotional fallout of flood damage.
improve your services
Raising 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 chance of damage from a flood and, thus saving you money on your premium.
elevate your property
It may sound 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 can save hundreds of dollars each year for every foot your home rises above your community’s base story elevation. Raising your home above the level of flood waters means it is much less likely to flood and reduces the risk of an insurance company having to pay a claim. Obtaining an elevation certificate, which maps out the specific elevation of your home on your property, could dramatically lower your premium. If you choose this route, you’ll need to obtain an elevation certificate each year around your renewal date to assess the best possible flood insurance rate.
maintain or install flood vents
For insurance purposes, the NFIP requires that all basement renovations and new home construction in highly flood-prone areas have flood openings below the lowest raised floor of the home, usually in at least two exterior walls. If your home doesn’t have flood vents, adding them could lower your premium. these openings allow water to drain out of your home, which could reduce the amount of damage that could occur.
fill in your basement
Being below ground level, basements are at high risk of serious flood damage. water can rush in and has no way to drain. Although filling a basement may seem like a drastic step, it could save you a lot of money on your flood insurance. If you’re a new homebuyer looking for floodplain homes, buying one without a basement might be a prudent financial option.
raise your deductible
Most flood policy deductibles start around $1,250 and can go up to $10,000 or more, although these figures can vary between NFIP policies and private companies. Generally, the higher your deductible, the more money you’ll have to pay out of pocket if you file a claim. As with homeowners insurance, a higher deductible generally leads to lower premiums because it agrees to cover more of the costs of repairs in the event of a claim, reducing risk to the insurance company. Since you’ll be responsible for paying your deductible if you file a claim, be sure to choose a level that makes financial sense for you.
relocate to a less risky area
A more drastic way to save money on flood insurance is to relocate your home to an area with lower risk of flooding. Although this does not completely eliminate the risk of flooding, moving to a low or moderate flood risk area can not only reduce your flood insurance premium, but also reduce the likelihood that you will have to file a flood claim.
move to a community rating system community
fema offers financial incentives to communities that work together to reduce everyone’s risk of flooding. If your community is granted Community Rating System (CRS) status, it can help lower the cost of your flood insurance. If you’re in the market for a new home, consider one in a CRS community to keep your flood insurance costs to a minimum.