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byDeante' Peake - Licensed Property & Casualty Producer
Deante' Peake - Licensed Property & Casualty Producer
Operations Sales Manager, Property & Casualty
Updated September 1, 2021|6 min read
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Since homeowners insurance typically doesn’t cover flooding, you’ll need flood insurance to protect your home and personal belongings from flood damage. In some cases, your mortgage company may require flood coverage if your home is in a flood zone and it’s secured by a federally-backed mortgage.
However, a startling number of homeowners who should have flood insurance don’t, and one of the main reasons for that is its high cost in flood-affected areas, according to a study conducted by consulting firm McKinsey. The study found that in counties most affected by hurricanes Harvey, Irma, and Maria, as many as 80% of Texas homeowners, 60% of Florida homeowners, and 99% of Puerto Rican residents didn’t have flood insurance.
Flood insurance in high-risk areas may be expensive, but it's a worthy investment when you factor in the potential cost of being uninsured. If you can’t afford flood insurance, there are a number of ways to keep your rates down.
The amount you'll pay for flood insurance is dependent upon how severe a flood zone you live in, your home's build, and how much coverage you need
If you find you're underinsured with a standard NFIP policy or that you're paying too much, private flood insurance may be a good alternative
There are several ways to keep your flood premiums down, such as elevating your home and moving certain utilities like water heaters to ground level
The average cost of National Flood Insurance Program (NFIP) coverage was $707, according to the latest data provided by the Federal Emergency Management Agency (FEMA). Flood insurance rates vary from home to home based on a number of factors, including the home’s:
Coverage amounts and type of coverage (federal government or private)
Age and build
Location and flood zone
Keep in mind that NFIP policies have a maximum coverage limit of $250,000 for your home, and $100,000 for the stuff in your home.
The following map and table are based on state-by-state average of NFIP rates. The vast majority of flood insurance in the United States is serviced and underwritten by the NFIP.
|State||Average premium||State||Average premium|
|District Columbia||$723.61||New York||$1,154.84|
There are a few states here — like Connecticut, Rhode Island, and Massachusetts — that you’d expect to see on this list. All three of the aforementioned states are small and on the coast, so one could assume a greater proportion of homes in those states are susceptible to flooding than larger coastal states.
But what about landlocked states like Vermont and Pennsylvania — why are NFIP averages so high compared to the national average?
The first thing to understand is that this is merely an average and not indicative of what you’ll pay for flood insurance if you live in just any city in Vermont or Pennsylvania. The second thing is the sample size here is considerably smaller than more flood-prone states like Texas and Florida, as flood insurance simply isn’t something that most folks in Vermont or Pennsylvania have or need.
The high average is because the properties that do need flood insurance in Vermont or Pennsylvania are located in areas with a higher risk of flooding.
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Conversely, two of the most flood-prone states in the U.S. — Florida and Texas — rank among the lowest for average NFIP rates.
To understand why, it's worth pointing out that flood insurance for homes not in flood zones can be very cheap, sometimes costing as little as $200 a policy. Simply put, the reason for the relatively low averages is there are a lot more low-risk, or Preferred Risk Policies (PRP), flood insurance policies in Florida and Texas than states not prone to flooding.
In that sense, it’s not even that flood insurance is necessarily cheaper in Texas and Florida, but that the risk is more spread out amongst a larger sample size. The low average also highlights the great value one can find in a flood insurance policy. A $200 policy for a home 100 miles off the coast is a small price to pay when you consider the potential of Category 5 hurricane waters to flood your home.
As we mentioned earlier, there are a number of factors that both the government program and private insurance companies use to set your flood insurance rates. According to FEMA, the critical factors that influence your rates are:
How much building structure and contents coverage you have
Your home’s age
Your home’s occupancy
Whether or not you have a basement (finished basements typically aren’t covered)
Location of your personal property
Location of your home’s lowest floor and its relation to the Base Flood Elevation
Your home’s flood risk
That last factor is perhaps the most significant, as your rates typically hinge on how susceptible your home is to being flooded. When you’re being underwritten for flood insurance, your adjuster will consider far more than just what city or state your property is located. They’ll particularly look at whether or not your home is in a FEMA-designated flood zone, and if so, how hazardous a flood zone.
There are three types of flood zones — A, B, and C — that will largely determine if you’ll be paying a lot or a little for flood insurance.
A high-risk flood zone, also known as a Special Flood Hazard Area (SFHA) are regions that face at least a 1% chance of flooding annually, and a 25% chance of flooding throughout the course of a 30-year mortgage.
If you live in a high-risk flood area and you have a mortgage backed by the federal government, like an FHA or VA loan, your lender will require you to get flood insurance. An SFHA flood policy is typically far more expensive than flood insurance in the following two zones.
Moderate- to low-risk areas have less of a chance of flooding than an SFHA, and your lender typically won’t require that you get flood insurance, but you should consider protection anyway.
If you live in Zone B, you’re eligible for a Preferred Risk Policy through the NFIP, meaning you could get a policy for as little as $200.
An undetermined flood zone is a region where your chance of being flooded is improbable, but not impossible. In fact, 55% of homes that incurred flood damage during Hurricane Harvey were outside of even a low-risk flood zone.
Keep in mind that just because a flood zone hasn’t been “determined” doesn’t mean that your home doesn’t face high flood risk; it simply means a map hasn’t been created yet. For that reason, if you apply for flood insurance in an undetermined area, you may have higher premiums due to the uncertainty.
The private flood insurance market is getting bigger, and that may be better for flood insurance rates, this according to a study conducted by consulting firm Milliman. The study looked at three states that account for over 50% of NFIP policies — Florida, Texas, and Louisiana — and found that an overwhelming number of homes in each state could see cheaper rates with private flood insurance.
In fact, it found that 77% of homes in Florida, 69% of homes in Louisiana, and 92% of homes in Texas could all get lower rates through private flood insurance. Of those homes, 44% in Florida, 42% in Louisiana, and 70% in Texas could see rates as low as one-fifth that of the NFIP.
Additionally, private flood insurance may provide a wider scope of coverage and higher coverage limits than that offered by the NFIP.
However, keep in mind that your insurance company can choose not to renew your private flood policy if they deem your home too risky. Your NFIP policy may provide less value for the price, but you have the added security of knowing you’ll stay insured.
There are a number of risk-prevention measures you can take to limit flood damage to your property; these measures can also lower your flood insurance rates. According to FEMA, the top five ways to lower your rates are:
Relocation - If you live in an area below the Base Flood Elevation (BFE), considering relocating your home (if tenable) or moving to an area above the BFE. This could significantly lower your rates.
Utilities - A home with utilities — like a water heater, electrical, plumbing, or ventilation — below the BFE will also be quoted higher premiums than if they were on higher ground. If you move into a home with utilities located in the basement, for example, consider building a utility shed at ground level — this could significantly lower your rates.
Flood openings - Flood openings, or vents, are just what the title suggests: if water gets into your home, the opening or vents is how the water gets out. Having flood vents installed in the side of your base floor can significantly lower your rates.
Basements - Homes with basements and crawlspaces generally aren’t rated very favorably by FEMA. In fact, if you have what FEMA considers a “subgrade” crawlspace, you could see your rates increase by 15% to 20%. If your home has a crawlspace, consider filling it in and turning it into foundation to lower your rates.
Elevation - Consider having a contractor retrofit your home above the BFE. In fact, you can save hundreds of dollars in premiums for every foot your home is elevated above your community’s BFE. FEMA has a handy explainer on retrofitting here.
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