The Cost of a Flood

Carl Chandler |
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The cost of flooding

Flooding can be an emotionally and financially devastating event. With flood insurance, you're able to recover faster and more fully. 

Just 1 inch of water can cause $25,000 of damage to your home.

What impacts flood insurance policy costs?

A number of factors are considered when determining your annual flood insurance premium. These factors include:

  • Flood risk (e.g., your flood zone)
  • The type of coverage being purchased (e.g. building and contents coverage)
  • The deductible and amount of building and contents coverage
  • The location of your structure
  • The design and age of your structure
  • The location of your structure’s contents (e.g. Are your utilities elevated?)

With Risk Rating 2.0: Equity in Action, FEMA has the capability and tools to address rating disparities by incorporating more flood risk variables. These include flood frequency, multiple flood types — river overflow, storm surge, coastal erosion, and heavy rainfall — and distance to a water source, as well as property characteristics such as elevation and the cost to rebuild. 

Your property’s elevation

For properties in high-risk flood areas built after the first Federal Emergency Management Agency (FEMA) flood maps, the elevation of the building in relation to the base flood elevation is also a factor.

While Elevation Certificates (ECs) will no longer be required to purchase coverage under Risk Rating 2.0: Equity in Action, a property owner may choose to provide an EC and submit it to their agent to determine if it will lower their cost of insurance. ECs will also continue to be used for floodplain management building requirements, which can affect eligibility for Community Rating System discounts.

Learn more about ECs and how you can pay less.

How can I pay less for flood insurance?

Your insurance premium is based on a number of factors but there are a few key actions you can take to pay less for flood insurance each year:

Lower your flood risk.

What you pay for National Flood Insurance Program (NFIP) flood insurance often has a lot to do with how much flood risk is associated with your property.

Mitigating your flood risk not only protects your property against flood damage but can also help lower insurance costs. For more information, check out the Homeowner's Guide to Retrofitting.

Common flood mitigation options include elevating utilities, installing flood openings, elevating your property, or relocating your home or business. 

Choose a higher deductible.

Choosing a flood insurance deductible amount is an important decision.

Choosing a higher deductible will lower your premium, but it means you will need to cover more of the cost to rebuild out of pocket (or out of savings).

You may choose different deductibles for building and contents coverage, and the deductibles will apply separately to building and contents claims.

Increasing the deductible on your flood insurance policy to the $10,000 maximum could reduce your annual premium by up to 40 percent. However, using the maximum deductible might not be appropriate or allowable for everyone.

Check with your insurance agent to confirm your deductible coverage amounts and ensure you understand your specific risks and opportunities.

Provide an elevation certificate.

While Elevation Certificates (ECs) will no longer be required to purchase coverage under Risk Rating 2.0: Equity in Action, a property owner may choose to provide an EC and submit it to their agent to determine if it will lower their cost of insurance. ECs will also continue to be used for floodplain management building requirements, which can affect eligibility for Community Rating System discounts.

Your community may receive a discount from the NFIP.

If your community is enrolled in the Community Rating System (CRS), you may receive a discount on your flood insurance.

The discount is calculated based on the community’s efforts to reduce the risk of flooding. If you have questions about the CRS, call your insurance agent or company.

You can also encourage your community officials to take part in the CRS.

Understanding your policy terms

For detailed information about your flood insurance policy, review the Flood Insurance Manual or contact your insurance agent today.

Coverage Limits

For residential properties, you can secure coverage up to $250,000 for the building and $100,000 for the building contents.

For commercial properties, you can secure coverage up to $500,000 for the building and $500,000 for the building contents.

Contents and building coverage are purchased separately, and there are always separate deductibles. Unless you have contents coverage, your flood-damaged belongings are not covered.

Purchase Requirements

If you live in the high-risk flood area and have a government-backed mortgage, you may be required to purchase flood insurance.

Deductibles

Your lender may set a maximum amount for your deductible.

As with other insurance plans, a higher deductible will lower the premium you pay but will also reduce your claim payment, meaning you will need to cover the difference out of your own pocket.

Separate deductibles apply to building and contents coverage. This means that if your building and contents are both damaged due to a flood event, both deductibles are applied.

 

Learn more about the cost of flooding at: https://www.floodsmart.gov/cost-flooding

 

Source: FEMA | National Flood Insurance Program