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How to shop for flood insurance
Many homeowners and renters learn too late that their insurance doesn’t cover damage or loss from flooding. If you live on a floodplain or near a high-risk coastal area, this can be a serious problem. It can also be an issue for people who live in areas that were previously considered low risk.
How do you compare flood insurance policies?
With the exception of some private policies, most flood insurance policies are identical. So finding the best flood insurance is really about comparing coverage limits and customer service.
SuperMoney offers free flood insurance reviews. Check what others have to say about a flood insurance carrier before you make a decision.
The following information will help you know what to look for (and what to ask) when shopping for flood insurance.
What is flood insurance?
Flood insurance is an insurance policy that covers damages to your property caused by a flood. For insurance purposes, a “flood” is defined as a temporary condition where two or more acres of normally dry land or two or more properties are fully or partially covered by water from one of the following:
- 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 prior erosion.
When shopping for a flood insurance policy, you can choose either property coverage, personal contents coverage, or both. Property coverage covers everything from the physical structure of your home to its plumbing and electrical systems. It also includes any furniture that is physically attached to the property. Personal contents coverage protects your possessions, like clothing, electronics, and valuables.
What types of flood insurance are there?
In addition to property coverage and personal contents coverage, flood insurance also comes at two levels: low-to-moderate-risk and high-risk.
Low-to-moderate-risk areas include inland areas far from major waterways, which are not prone to flooding during severe weather.
High-risk areas include coastal areas, or areas located in a floodplain.
Flood zones are determined by FEMA’s flood maps. Check what the flood risk is in your neighborhood using FEMA’s Flood Map Service Center (PRP). The age of a structure and its contents also influence risk assessment.
What is (and isn’t) covered by flood insurance?
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 that 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, and property outside of your home. As well, coverage for basements and other areas located below the lowest elevated floor (such as septic systems and crawl spaces) will be limited or nonexistent. Be sure to check your policy for any specific exemptions as they will vary from one provider to the next.
Where can I get flood insurance?
The first place to check for flood insurance is the National Flood Insurance Program (NFIP), 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. (Source: FEMA.) If you need higher limits or more expansive coverage than the NFIP offers, you can turn to a private insurer.
What is the waiting period for activating a flood policy?
Most NFIP flood insurance policies come with a 30-day waiting period. But there are exceptions (source):
- If FEMA has changed the risk category of your area within the last 13 months, the waiting period is just one day.
- If you purchase flood insurance in connection with making, increasing, extending or renewing your mortgage loan, the policy is activated immediately.
- The policy can become active within one day if the property is affected by flooding on burned federal land, provided the flooding is the result of, or has been made worse by, post-wildfire conditions. To qualify under this provision, the policy must be purchased within 60 days of the fire containment date.
Private policies can have shorter waiting periods of 10 to 14 days.
Do you even need flood insurance?
That depends on your circumstances. Some homes and businesses in high-risk areas are required to have flood insurance, especially while paying off mortgages from federally insured or federally regulated lenders. But flood insurance is available to anyone who wants damages covered in the event of a catastrophic flood.
In fact, the NFIP website reported as recently at 2019 that more than 20% of flood claims came from policyholders who did’t live in high risk areas. And a third of all disaster relief for flooding went to low-risk areas.
Flood insurance is generally available in towns and cities that participate in the NFIP. If your town participates, you can purchase a flood insurance policy through a local insurance agent.
How much flood insurance do you need?
Ideally, you should purchase as much flood insurance coverage as you need to cover the cost of the structure and contents of your property. As already noted, however, the maximum coverage with the NFIP is $250,000 for your home and $100,000 for your personal property. Private flood insurance, on the other hand, can have much higher limits.
If you’re a homeowner or business owner, you should get structural and content coverage.
If you own a condo or hold a business lease, you probably only need content coverage. Typically, homeowners associations will purchase flood insurance for their members. But it doesn’t hurt to check. You may also want structural coverage, but that depends on your specific arrangement.
As a residential or commercial renter, you only need content coverage.
How much should you expect to pay for flood insurance?
The federal government’s National Flood Insurance Program costs an average of $700 per year. However, it may cost more or less depending on your area’s risk level. Some may acquire NFIP policies for less than $400 a year. Others may have to pay premiums as high as $2,500 a year. And, unfortunately, flood insurance premiums are paid upfront on an annual basis (in a single lump sum).
A 2014 law prevents any policyholder from seeing an annual rate increase exceeding 18%. It also requires the Federal Emergency Management Agency (FEMA) to try to prevent coverage from costing more than 1% of the amount covered. So, if you purchase a policy with $100,000 in coverage, the premium would not exceed $1,000.
Do you want private insurance or a federal policy?
If your home is in an NFIP-supported area, a federal policy will likely be cheaper. However, if your town does not participate in this federal program, private flood insurance is a good alternative. Also, if your home and possessions are worth more than NFIP limits ($250,000 for property, $100,000 for possessions), private flood insurance may better suit your needs.
Private flood insurance rates are fairly consistent across state lines. Rates vary based on how much coverage you need, and on how far you are from a body of water.
How can you lower your flood insurance premiums?
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.
Ways to save money on your flood insurance policy:
This guide will provide details on how to put these suggestions into practice.
Apply for a Preferred Risk Policy
One way to lower costs is to apply for a Preferred Risk Policy (PRP). A PRP is a standardized flood insurance policy that offers low-cost coverage to owners and tenants of eligible buildings in designated moderate-risk areas.
Get a higher deductible
Another way to save money is to get a higher deductible. The minimum deductible for flood insurance is $1,000, and the maximum deductible is $10,000. Homeowners can save up to 40% on premiums by increasing their deductible.
This means that if you live in a high-risk area you could make up the added cost of a claim in less than 3 years if you increase your deductible to $10,000.
Raise your home’s elevation
Possibly the best way to lower your flood insurance premiums is to raise your home’s elevation. Going from four feet below the Base Flood Elevation (BSE) to three feet above it would save over $90,000 in 10 years. You may qualify for low-cost loans or grants to help you increase the elevation of your home.
One way to raise your home’s elevation is to use freeboards.
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.
The benefits far outweigh the costs, too. It costs roughly 0.4% of the total construction cost to add one foot of freeboard.
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 that 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 freeboards 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.
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.
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. An elevation certificate can prevent this.
An elevation certificate may cost you roughly $500 and won’t guarantee you savings. If the findings are good, though, the certificate could free you from the flood zone insurance requirement. This could 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.
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:
- Elevate 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.
- Review the flood openings or flood vents in your home to ensure they meet the correct specifications set by FEMA.
- Use flood-proof materials and make other adjustments to your home to decrease the chance of water damage during a flood.
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.
What do the flood insurance reviews say about the company?
Whether you’re working with a private flood insurance company or purchasing an NFIP policy through a local insurance agent, you need to know that you can trust your insurance agent. The last thing you want is to pay for an insurance policy, only to have your insurance company ignore you and deny coverage when you need it the most.
How can you find an insurance company that you can trust? The best way to know for sure is to read reviews from past customers. Honest customer feedback can help you steer clear of disreputable companies. Plus, you can learn how easy or hard it is to get in touch with your insurer when you need them.
Getting started with flood insurance
So you’ve decided that you need flood insurance. You know how much coverage you want, and you have checked the flood risk of your area.
It’s time to check flood insurance reviews and compare the customer care of the flood insurance companies in your area. Shopping around is important if you want to find an agent you can trust. SuperMoney makes it easy with our list of reputable flood insurance companies and free reviews.