Flood Insurance: Reviews & Comparisons
Many homeowners and renters learn too late that homeowners insurance or renters 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 previoulsy considered low risk.
However, finding the right flood insurance policy is not always straightforward. This guide will help you compare flood insurance policies and find the best one for you.
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 questions 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 general and temporary condition where two or more acres of normally dry land or two or more properties are inundated by water or mudflow.
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?
Damage from flooding that occurs through extreme weather or by other unavoidable circumstances is covered. On the other hand, damage from mold that could have been avoided is not covered.
Likewise, damage to trees, cars or structures not associated to the home or business property is not covered. Also, coverage is limited for basements and other areas of structures located below the lowest elevated floor.
What is the waiting period for activating flood policy?
Most NFIP flood insurance policies come with a 30-day waiting period. However, there are exceptions (source):
- If FEMA 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 be active withing one day, if a property is affected by flooding on burned federal land that is a result of, or is exacerbated by, post-wildfire conditions when the policy is purchased within 60 days of the fire containment date.
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, according to the National Flood Insurance Program (NFIP) website, 20 percent of its claims are filed by policyholders outside of high-risk areas. And a third of all disaster relief for flooding also goes to low-risk areas.
Flood insurance is generally available in towns and cities that participate in the National Flood Insurance Program, or NFIP. If your town participates in the NFIP, 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. 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 its members. Although it doesn't hurt to check. You may also want structural coverage, but it 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. For many, a National Flood Insurance Program's policy could cost less than $400 a year. However, premiums can go up to $2500 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 percent. It also requires the Federal Emergency Management Agency (FEMA), to try to prevent coverage from costing more than 1 percent of the amount covered. So, if you purchase a policy with $100,000 in coverage, the premium would not exceed $1,000.
How can you lower your flood insurance premiums?
There are several ways to lower costs, such as applying 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.
However, the best way to lower your flood insurance premiums is to raise your home's elevation. Going from four feet below the 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 elvation of your home.
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.
Compare flood insurance companies and request quotes to find out what each policy will cost you.
How much coverage do you need?
Do you only need property coverage, or do you want to protect your possessions, as well? NFIP property coverage typically covers your home up to $250,000, while its personal contents coverage covers up to $100,000. If you need more, try with a private policy.
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, unbiased 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.
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 the cost of your home and possessions are higher 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 how far you are from a body of water.
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.
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