Floods are the nation’s most common natural disaster, but the damage is rarely covered under your homeowners or renters policy. In fact, if you don’t want to foot the bill for any flood-related damage out-of-pocket, you’ll need an entirely separate flood insurance policy for your property.
Flood insurance is designed to cover damage and loss that results from externally-caused flooding — flooding due to heavy rains, snowstorms, overflowing storm drains or levees, etc. In places that are particularly prone to flooding, mortgage lenders often require flood insurance before they’ll approve a homebuyer’s loan.
I have homeowners insurance, isn’t that enough?
Homeowners insurance and renters insurance policies may offer protection for plumbing-related flood damage and water leaks, but they won’t cover losses due to naturally occurring floods.
This can leave homeowners in a particularly hard position should flooding occur. According to the Insurance Information Institute, the average loss experienced by a homeowner in Hurricane Katrina was $97,500. Homeowners affected by Hurricane Harvey say damages average just under $117,000.
To see if you should consider flood insurance, use the FEMA flood mapping tool to assess your home’s risk of flooding. If your home is in a high-risk area, your mortgage lender will likely require a policy before they’ll grant your loan. If you’re in a lower-risk area and flood insurance is not required by your lender, you might still consider insuring the home just to be safe. According to the III, 20% of flood claims are filed in low to moderate risk flood areas.
How does flood insurance work?
Here’s how the III describes flood insurance coverage: “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.”
These losses aren’t covered under traditional homeowners or renters insurance, so you’ll have to get the policy separately. These policies are offered through the National Flood Insurance Program and through private insurance companies (more on this later), and there is usually a waiting period before your coverage kicks in. After that point, your policy will start to cover losses should flood damage occur on your property.
What’s covered under flood insurance?
Flood insurance comes with both building coverage and contents coverage. Building coverage pays for damages to your foundation, electrical and plumbing systems, HVAC equipment, flooring, built-in appliances and fixtures, blinds, and walls. Contents coverage is for damaged clothing, furniture, electronics, and portable appliances within the home.
What isn’t covered under flood insurance?
Flood insurance policies won’t cover damage caused by moisture, mildew or mold that could have been prevented. Damage caused by earth movement, outdoor belongings like decks, patios, and pools, and additional living expenses like temporary housing are also not covered under flood insurance. These items 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 and offers up to $250,000 in building coverage and $100,000 in contents coverage. You can also purchase “excess” coverage, which covers properties valued above those limits.
Over 100 insurance companies 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 not 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 cover losses.
Private flood insurance can be more comprehensive than NFIP policies and often comes with higher limits. Additionally, waiting times for private flood insurance are usually shorter than the 30-day period NFIP requires.
Another important fact to take note of: 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 may seem like a smart 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.
How much does flood insurance cost?
The average annual cost of NFIP coverage was $642 in 2018, though the exact price of flood insurance will depend on several factors, including:
- 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
Because of the increase in natural disasters, flood insurance rates are on the rise. Fortunately, there are ways to reduce how much you pay for your flood insurance policy.
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 your 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 in your area can result in a 30% reduction in annual premiums, according to FEMA.
- Utilities – Move any machinery and utilities that service your building to somewhere above the base flood elevation — such as an attic or closet.
- Flood openings – One common reason why flood insurance policies are rated so severely is due to a lack of proper flood openings. Garage doors, windows, and doors don’t count unless they have flood openings installed within them. Installing additional flood openings, especially if you’re in a high-risk area, can help low your premiums significantly.
- 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.