Complete Guide to Flood Insurance

Everything you need to know about protecting yourself with flood insurance

Percentage of all flood insurance claims filed by policyholders outside of mapped high-risk flood areas (National Flood Insurance Program).

Flooding is a natural disaster that affects people in all states across the country. Unfortunately, even a small amount of water damage can decrease the value of your home and ruin your belongings. But you can take preventative action by signing up for flood insurance.

The average annual premium for flood insurance is $707, according to the National Flood Insurance Program (NFIP). But that number may be skewed downward due to premiums for low-risk flood zones.

Here’s a closer look at the ins and outs of flood insurance and how you can minimize the costs.

What is flood insurance?

According to FEMA, a flood is a temporary situation in which a minimum of two acres of land (which is normally dry) and two properties are partially or completely covered in water. The water must have come from:

  • Mudflow.
  • An overflow of tidal or inland waters.
  • A rapid and unusual runoff or accumulation of surface waters due to any cause.
  • The collapse of land along the shore of a body of water due to erosion from excess water or erosion.

If your home or belongings are damaged due to flooding, a flood insurance policy is designed to reimburse you so you can recover from the loss.

What does flood insurance cover?

With flood insurance, you can choose whether you want coverage for your home’s structure, for the contents inside your home, or both. Here’s what the coverage types usually include:

Coverage for your home’s structure

Structure flood insurance covers your home’s structure and its foundation. It also covers items which are permanently installed in the house such as the plumbing and electrical systems.

Additionally, your water heater, flooring, drywall, sheathing, heating and air conditioning (HVAC) system, and a detached garage are usually covered. However, other detached buildings will require a separate policy.

Coverage for your belongings

A policy with coverage for your belongings will reimburse you for the loss of your property that is not part of your house.

Examples of qualifying belongings include curtains, blinds, electronics, window A/C units, clothing, select valuables, and furniture.

What doesn’t flood insurance cover?

What can’t you get coverage for? Flood insurance does not cover lost or damaged money, precious metals, vehicles, property outside of your home, basements, septic systems, or crawl spaces. Be sure to check your policy for any specific exemptions as they will vary from one provider to the next.

Do I need flood insurance?

Flood insurance can help to protect your home against the most common and costly natural disaster in the U.S. Floods cause millions of dollars in damage each year. Renters and homeowners insurance policies do not cover damage due to flooding so a separate policy is needed.

While you may not live in a flood zone, FEMA reports that more than 20% of flood claims are from policyholders who don’t live in high risk areas. They also receive one-third of federal disaster assistance for flooding. Further, all 50 states have had flash floods over the past five years. Flood insurance premiums are more affordable in areas with a low risk and can make the difference between financial devastation and recovery if a flood occurs. The peace of mind is often worth the investment.

Further, flood insurance is required by some lenders on mortgaged properties, especially those in high-risk areas.

Renters will not need a policy to cover the structure of their homes as that is the responsibility of the property owner. However, they can benefit from a policy to cover their belongings.

Where can I get flood insurance?

The first place to check for flood insurance is the National Flood Insurance Program (NFIP) which is provided by the Federal Emergency Management Agency (FEMA).

The program was created by the federal government to reduce the impact of flooding on public and private structures by making affordable insurance available. It also encourages communities to recognize and enforce floodplain management rules. It is available to businesses, homeowners, and renters.

FEMA’s NFIP flood insurance policy for residential buildings provides a maximum of $250,000 in structure coverage and $100,000 worth of coverage for personal belongings. If you need higher limits or more expansive coverage than the NFIP offers, you can turn to a private insurer.

Compare private flood insurance companies below.

How to save on flood insurance

If you live in a high-risk zone, you could be on the hook to pay upwards of $2,000 per year. So it’s crucial that you understand how to save on flood insurance.

Five ways to save money on your flood insurance policy:

  1. Use a freeboard to elevate your home
  2. Get an elevation certificate
  3. Move to a community with a high CRS rating
  4. Make sure your home is up to code
  5. Shop around for policies

This guide will provide details on how to put these suggestions into practice.

1. Using freeboard to elevate your home

If you’re building a new home in a flood zone, consider adding freeboards. “Freeboards are several pillars under a home that elevate it higher than the legally mandated height requirement,” says Brent Thurman, president of Utah-based Keystone Insurance. He adds, “These are used in coastal areas that have a high potential for high sea water and storm surge, and are largely effective at reducing losses due to flooding. ”They can also save you a lot more money than they cost to add to your new home. Here’s a quick look at the savings you could get by adding freeboards. Note that the V zone is the most hazardous of the Special Flood Hazard Areas — think beachfront properties — and the A zone is the second-most hazardous.

$300,000 mortgage loanThe benefits far outweigh the costs, too. It costs roughly 0.4% of the total construction cost to add one foot of freeboard. So, let’s assume the following:

  • 30-year fixed mortgage
  • 5% interest rate
  • V zone

2. Move to a community with a high CRS rating.

The NFIP uses the community rating system (CRS) to reward communities that engage in certain activities which go above and beyond the agency’s minimum standards for floodplain management. There are 19 activities that give communities extra points –– the more points a community earns, the higher the discount residents in that community can get on flood insurance.

Here are just a few examples of activities that your community can do to earn points:

  • Maintain FEMA elevation certificates on all buildings built after the date of their CRS application.
  • Provide residents with information on flood insurance and flood protection in the public library or on the community’s website.
  • Keep flood and property data on record.
  • Require freeboard or compensatory storage.

Depending on how many points a community earns from these and other activities, discounts can range from 5% to 45%. Keep in mind, though, communities that aren’t in special flood hazard areas max out at a 10% discount.

An elevation certificate will help if you are located in a flood zone, but happen to be at a higher elevation within that zone”

If you don’t want to move to a new community, consider lobbying your current community’s leaders to make the necessary changes to improve their CRS rating. Earning up to a 45% discount could save you and your neighbors a lot of money every year.

3. Get an elevation certificate

If you live in a certain flood zone, you may be charged the same rates as people who live in more susceptible areas within that zone.

A typical elevation certificate will cost roughly $500 and doesn’t guarantee you savings, but if the findings are favorable, it could move you completely out of the flood zone insurance requirement, which will immediately save you thousands of dollars per year.”

“An elevation certificate will help if you are located in a flood zone, but happen to be at a higher elevation within that zone,” says Thurman. He explains, “A typical elevation certificate will cost roughly $500 and doesn’t guarantee you savings, but if the findings are favorable, it could move you completely out of the flood zone insurance requirement, which will immediately save you thousands of dollars per year.” Even if it doesn’t eliminate the insurance requirement, it may still lower your premiums by proving that your home is not as much of a risk as others in the area.

4. Make sure your home is up to code.

Depending on the state of your property, your insurance company may add certain surcharges to your premium, making your policy more expensive.

Eliminate these surcharges by making a few adjustments, including:

  • Elevating utility equipment that services your home, such as heating, cooling, electrical, ventilation, and plumbing. If possible, move these to your attic or at least above the base flood elevation.
  • Reviewing the flood openings or flood vents in your home to ensure they meet the correct specifications set by FEMA.
  • Using flood-proof materials and making other adjustments to your home to decrease the chance of water damage during a flood.

5. Shop around

While you can purchase your flood insurance policy through the NFIP,  you also have the option to purchase it through private insurers. By comparing prices from various providers, you can potentially lower your costs.

Check out SuperMoney’s flood insurance review page to learn more about various providers and what they have to offer. Make sure to consider the type of coverage they offer before going with the lowest rate. Some providers that charge a little more may offer better coverage. The last thing you want is to get the cheapest option and end up paying more because your policy doesn’t cover all the damage.

The bottom line

Flood insurance is a necessity in many areas of the United States, but you’re not stuck with paying what everyone else does. With these tips in mind, you can save hundreds, if not thousands, of dollars every year on your flood insurance premiums.

The more you save, the more money you’ll have to put toward more important financial goals.