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You might think your home won’t get flooded because you’ve never seen more than a big puddle in your yard. But 99% of counties in the United States were impacted by flooding between 1996 and 2019, according to FEMA. And here’s the problem: Far too many Americans don’t believe a flood is a major risk to their homes. Only 3% of homeowners believe they have a moderate to high risk of flooding within the next two years, according to a survey conducted by Swiss Re, an insurance company. Devastating floods can happen suddenly, both near the coast and in usually dry areas. Floods can be caused by predictable events that are exhaustively covered by the media, like hurricanes, but also by flash floods from heavy rain. And no number of sandbags or sheets of plywood can hold back devastating floods. Unfortunately, a standard homeowners insurance policy won’t cover flood damage—and only 15% of homeowners have flood insurance. Without flood insurance, you could be hit hard with out-of-pocket expenses. The average payout on a flood claim from the National Flood Insurance Program (NFIP) was $52,000 in 2019, according to the most recent data from the FEMA. Flood damage from problems like hurricanes and torrential rain is not covered by a standard homeowners insurance policy. A flood insurance policy is a separate policy that covers your house and your belongings for flood-related damage. The majority of homeowners who buy flood insurance buy it from the National Flood Insurance Program, but you may be able to buy a policy in the private market. Flood insurance can cover problems such as:
Flood insurance through the NFIP has a 30-day waiting period before coverage goes into effect, meaning you can’t make a flood insurance claim for damage that occurred during the waiting period. Some private flood insurance companies have a shorter or no waiting period. For example, Zurich Residential Flood Insurance does not have a waiting period. If your house and belongings are damaged or destroyed by a flood, you can file a claim with your flood insurance company and be covered up to your policy’s limit. For example, if you had an NFIP policy with $250,000 in building coverage, you would be covered up to that amount. Some homeowners purchase private flood insurance as an “excess” policy to provide additional coverage on top of their base NFIP policies. What Does Flood Insurance Cover?Flood insurance can generally be broken into two main parts: Dwelling (your house) and contents (your belongings). You may be able to purchase a building-only policy, a contents-only policy or both, depending on where you purchase your flood insurance from. Dwelling coverageDwelling coverage, also called building coverage, helps pay to repair or replace your house due to flood-related damage. For example, if flood waters damaged your electrical and plumbing systems, the dwelling coverage would pay to repair or replace it. Flood insurance through the NFIP caps dwelling coverage to $250,000. You may be able to buy higher amounts of dwelling coverage in the private market. For example, Flood Guard and TypTap sell policies with up to $5 million in dwelling coverage. Contents coverageContents coverage, also called personal property, is what covers your personal belongings, such as furniture, clothing and appliances. For example, if flood waters destroy your living room furniture, your contents coverage would pay to repair or replace the items. An NFIP flood insurance policy caps contents coverage to $100,000. You may be able to buy higher contents coverage through the private market. For example, you can buy up to $1 million in contents coverage from Flood Guard and up to $250,000 from TypTap. FEMA Flood Insurance Basics for Residential PropertiesWhat Doesn’t Flood Insurance Cover?Flood insurance doesn’t cover every type of water damage. A flood policy from the NFIP typically does not cover:
Do I Need Flood Insurance?Flood damage is not covered by standard homeowners insurance, so if you’re concerned about flooding you should look into flood insurance. A Swiss Re survey exposes a common mistake among homeowners: 43% believe their home insurance policy will cover them for flood damage. Homeowners insurance for water damage is generally limited to problems like burst pipes—not an inundation of water on the ground. In some cases, you may be required to have flood insurance. For example, if you own a home or business and have a government-backed mortgage, you’ll be required to have flood insurance if you live in a high-risk flood area. The price of flood insurance can turn off many homeowners who aren’t required to have it. But having a flood insurance policy can provide immediate financial assistance so that you don’t have to wipe out your savings or take out a loan in order to rebuild. Relying on federal disaster aid after a flood isn’t a good financial plan. Disaster aid can take many months, and isn’t offered after every flood. Disaster victims who don’t have insurance often rely on funds from the Disaster Loan Program of the Small Business Administration (SBA). SBA loans can provide up to $200,000 for homeowners to repair their primary residences. In addition, homeowners and renters can receive up to $40,000 to repair personal property (such as furniture) or replace it. You’re expected to pay the loan back, although they have low interest rates and can have long terms, such as 30 years. How to Get Flood InsuranceThere are two ways to get flood insurance:
The NFIP is required to take all applicants who live in communities that participate in the NFIP. Private insurers can be selective in who they sell to. Ultimately, if your property has had past flood damage or you live in a high-tide flood area, your choice will likely be limited to a FEMA policy. How Much Does Flood Insurance Cost?Here’s a look at the average coverage amount and annual cost by state for an NFIP flood insurance policy, according to a Forbes Advisor analysis of flood insurance rates. Average flood insurance cost by stateYour flood insurance cost will vary depending on several factors, such as:
How Can I Get Cheap Flood Insurance?Choose a higher deductibleThe insurance deductible is the amount that’s deducted from your insurance claim check. For instance, if your home suffers $20,000 worth of flood damage and your deductible is $1,000, the insurance company will send you an insurance check for $19,000. A higher deductible amount will result in lower flood insurance costs. You might also qualify for a discount. For example, FEMA offers up to a 40% discount if you select a $10,000 deductible. Mitigate your flood riskYou may qualify for mitigation discounts if you take steps to reduce your flood risk. For example, FEMA offers discounts to homeowners who take actions such as installing flood openings and elevating equipment and machinery (like a hot water heater or central air conditioner) above the first floor. Get an elevation certificateYou may qualify for lower flood insurance costs if you have an elevation certificate that shows your first floor is higher than the first floor determined by FEMA. Community discount from the NFIPMore than 1,000 communities qualify for cheaper flood insurance based on the NFIP’s Community Rating System (CRS). CRS discounts are based on your community’s actions to reduce flood risk, such as establishing floodplain management programs. Ask your insurance agent if your community participates in the CRS. Compare flood insurance quotesThe majority of homeowners who buy flood insurance get it from the NFIP, but you may have options through the private market. It’s a good idea to get flood insurance quotes from both the NFIP and private flood insurance companies. Coverage from National Flood Insurance Program (NFIP)The National Flood Insurance Program from FEMA is backed by the federal government and offers basic flood insurance. There won’t be many choices to make if you buy a FEMA flood insurance policy. To buy a FEMA policy you’ll go through a regular insurance company, such as Allstate or Farmers, not directly to the NFIP. Here’s an NFIP insurance provider locator. FEMA policies have a 30-day waiting period before coverage takes effect after the purchase, unless the policy purchase is tied to a loan that requires flood insurance. So don’t wait until hurricanes start to form to start shopping for flood insurance. Federal flood insurance covers two main things: Your house (the building) and your belongings (contents). You can buy a building-only policy, a contents-only policy or both. Building coverage from the NFIP:
Contents coverage from the NFIP:
Replacement Cost vs. Actual Cash Value CoverageThe FEMA flood program offers two choices of coverage for a building:
Contents, such as furniture, always gets actual cash value coverage from the federal flood insurance plan. That can leave you with a big gap between your insurance check and what you need to buy new stuff. Keep this in mind as you look at flood insurance options. FEMA flood insurance does not cover “additional living expenses” or “loss of use.” This would reimburse your extra expenses if you can’t live at home because of flood damage. To buy federal flood insurance, your community must participate in the NFIP. Yours likely does, but you can look it up here. Related: Replacement cost vs. actual cash value FEMA’s Risk Rating 2.0 for Flood InsuranceIn the past, FEMA relied on “flood zones” to set flood insurance rates. But this system led to inaccurate pricing for many properties, and contributed to the massive debt of the National Flood Insurance Program (currently at more than $20 billion). FEMA recently announced its new Risk Rating 2.0 as a means to address its outdated rating methodology, citing advances in technology, access to data and an evolution in understanding flood risk. Risk Rating 2.0 was effective for new policies on Oct. 1, 2021, and later. Existing policyholders could take advantage of new rates on Oct. 1, 2021. Risk Rating 2.0 became effective for all remaining policies renewing on or after April 1, 2022. Instead of using flood zones, Risk Rating 2.0 calculates flood insurance rates based on:
FEMA says the key benefits of Risk Rating 2.0 are:
To develop Risk Rating 2.0 rates, FEMA says it used data from multiple sources, including:
Related: Here’s who gets hit hardest by new FEMA flood insurance rates Private Flood Insurance OptionsPrivate flood insurance options can give you better coverage than a FEMA policy. Private flood insurance policies can be stand-alone, meaning they provide your primary, or base, flood insurance. Or they can be “excess,” meaning they provide additional coverage on top of a base policy, such as a FEMA policy. Despite the better coverage options, private flood insurance is a very small percentage of the overall market. The Wharton Risk Management and Process Decision Center estimates that private flood policies comprise only 3.5% to 4.5% of primary residential flood policies. Zurich Insurance Group has the largest market share in the private flood insurance market, making up 16% of the market share, according to the Insurance Information Institute. It’s followed by American International Group (14.9%) and Assurant, Inc. (10.2%). If you have a large and/or expensive property and want the best coverage, you’ll want to look into a base policy plus an excess flood insurance policy. Here are some examples. Zurich Residential Private Flood InsuranceZurich has teamed with Wright Flood Insurance to offer stand-alone flood policies in California, Florida, New Jersey, South Carolina and Virginia, with plans to expand to additional states. Customers can customize a policy to meet the needs of the property, with up to $1 million in dwelling coverage, replacement cost for both the dwelling and personal property, and no waiting period. The policies are sold through agents who sell Wright Flood insurance. Because Zurich has better coverage options than a FEMA flood insurance policy, average prices are higher. For example, in New Jersey, the average Zurich flood policy premium is about $16,300 a year, according to a filing made with the New Jersey department of insurance. Compare: NFIP vs. Zurich Residential Private Flood InsuranceFlood GuardFlood Guard insurance is available as primary or excess flood insurance in Arizona, California, Illinois, Indiana, Nevada, Oklahoma, Oregon, Pennsylvania, South Carolina and Utah. It’s available only through insurance agents who are affiliated with Prospect General, an insurance brokerage. Policies are underwritten by Palomar Specialty Insurance. Compare: NFIP vs. Flood Guard InsuranceTypTap Flood InsuranceTypTap offers flood insurance in Florida, Maryland, New Jersey, Pennsylvania and South Carolina. Compare: NFIP vs. TypTap Flood InsuranceWhen Is It Too Late to Buy Flood Insurance?If you’re worried about an impending storm or hurricane, you may be wondering if it’s too late to buy flood insurance. Some flood insurance plans have a 30-day waiting period, but you may have some options to buy flood insurance without a waiting period. If you want to purchase an NFIP flood insurance policy, you’ll most likely have a 30-day waiting period. There are some exceptions:
If the NFIP waiting period waivers (or reduction) does not apply to you and you want to buy flood insurance right away, you may be able to get a plan from a private insurer. Here are some private insurance companies that offer flood insurance with no waiting period:
If you can’t find flood insurance without a waiting period, you may be able to find an insurance company that has a shorter one. For example, Neptune Flood Insurance has a 10-day waiting period. Private Market Flood has a 14-day waiting period, but the waiting period could be waived under certain circumstances, such as replacing an existing NFIP policy.
Compare rates from participating carriers in your area via Policygenius.com Flood Insurance FAQs
Homes and businesses with government-backed mortgages are required to have flood insurance if they are in high-risk flood zones. Even if you live outside of a high-risk zone, your lender could require you to get flood insurance. If you live in a high-risk area and have received federal disaster assistance, such as grants from FEMA or a low-interest disaster loan from the U.S. Small Business Administration, you are required to have flood insurance to be considered for any future federal disaster aid. Homeowners in low-risk flood areas may also want to get a policy so their homes are properly insured against flood damage. Those low-risk areas typically have cheaper flood insurance policies than high-risk areas.
FEMA is the biggest but not the only provider of flood insurance. If you want a FEMA policy from the National Flood Insurance Program, call your home insurance agent to see if they can give you a quote. Or you can buy flood insurance from a private insurer. These policies offer base coverage (which would take the place of an NFIP policy) or “excess” coverage, meaning you’d buy them in addition to a base policy. An excess flood insurance policy gives you additional coverage to fill gaps between a base policy (like FEMA insurance) and your actual flood insurance needs for your property.
The NFIP defines a true “flood” as: “an excess of water on land that is normally dry, affecting two or more acres of land or two or more properties.” If you want to make a flood insurance claim, your problem will have to meet the definition of a flood. A burst water pipe in your basement, for example, may result in a ton of water but isn’t a “flood” by insurance industry standards. Damage from a burst water pipe would be covered by your homeowners insurance. Mudflow and erosion can also qualify as “floods.” For example, a river of mud caused by a wildfire or long, heavy rain can be a “flood” that’s covered by flood insurance.
Flood insurance can cover hurricane-related water damage, if the cause fits the definition of a “flood,” such as storm surge. Flood insurance is one part of a solid hurricane insurance plan. Coverage for hurricanes is often a mix of flood and homeowners insurance. While flood insurance covers flood damage, your home insurance will cover other types of problems such as wind damage and roof leaks. In some areas, like coastal Texas, homeowners need to buy separate windstorm coverage for wind damage. |