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A standard homeowners insurance policy typically doesn’t cover damage from flooding. Paying out of pocket to repair property or replace belongings after a storm surge or heavy rain can be costly. Just one inch of water can cause $25,000 worth of damage to the average home, according to FEMA.
If you live in a high-risk area and have a government-backed mortgage, your lender will require you to purchase flood insurance. But even if it isn’t required, getting coverage is still worth considering — Mother Nature is unpredictable, and being insured can give you peace of mind.
Here’s what you need to know about the cost of flood insurance.
If you’re looking for flood insurance through a private insurer, Credible can help you easily compare insurance rates from top carriers.
How much does flood insurance cost?
Like standard home insurance policies, the cost of flood insurance will depend on your risk, the type of policy you purchase, and the coverage you choose.
Homeowners have two options for flood insurance — National Flood Insurance Program (NFIP) policies administered through FEMA, or private insurance policies.
The NFIP offers flood insurance to property owners in participating communities delivered through certain insurance companies, like Allstate or Farmers. The average cost for an NFIP policy was $700 per year in 2019, and deductibles can range from $1,000 to $10,000. Your lender may set a maximum deductible, and you must pay a separate deductible for building coverage and contents coverage.
An alternative to NFIP coverage is private flood insurance, which you can obtain through independent insurance companies. Private flood policies may come with higher coverage limits to insure a high-value home and high-value possessions. Premiums for private insurance can vary depending on your coverage limit, where your home is located, and your deductible.
Factors that affect flood insurance costs
Many factors can affect the cost of home insurance policies, and the same is true for your flood insurance premium. Here are some variables that determine how much flood insurance costs:
- The type of coverage you choose — The higher your coverage amount and lower your deductible, the higher your premium will likely be.
- Where your home is located — Homes in higher-risk areas generally cost more to insure.
- The cost to rebuild your home — The amount it’ll cost to rebuild your home in the event of a disaster can affect your premium.
- The elevation of your home — Elevating your home could lower your flood risk and lower your insurance premium.
- Where home systems are located — If your heating and electrical systems aren’t elevated, this could increase your premium, since they could be more susceptible to damage in the event of a flood.
HOW TO BUY HOMEOWNERS INSURANCE
How to save on flood insurance
Purchasing flood insurance doesn’t have to break the bank. Taking the steps below could help you reduce the cost:
- Shop around. Getting quotes from multiple policy providers to compare rates and coverage can help you find the best deal.
- Increase your deductible. Increasing your deductible or decreasing your coverage could lower the amount of your premium. In fact, increasing your deductible to $10,000 could save you 40% on your annual premium, according to FEMA. But you’d also have to pay $10,000 in the event of a flood before your insurance would kick in to help you cover costs. Before changing your coverage, make sure you have sufficient savings or income to cover your potential out-of-pocket costs if a disaster happens.
- Install flooding openings. A flood vent installed in your home can let water escape during a flood and may help lower your premium because it can lower your risk of damage.
- Elevate home systems. Raising your heating and cooling systems and other utilities could reduce risk and the cost of flood repairs.
Visit Credible to get flood insurance quotes from multiple carriers in minutes.
What is Risk Rating 2.0?
Risk Rating 2.0 is a new system FEMA implemented in 2021 that’s designed to offer a more accurate risk assessment for NFIP flood insurance rates. This is an important development for NFIP policyholders, since the expanded risk evaluation now takes into account more information when determining your quote, which could lead to policy savings for some homeowners.
Risk Rating 2.0 launched for new policies on Oct. 21, 2021, and rolled out to existing policies on April 1, 2022. The Association of State Floodplain Managers and the Pew Charitable Trusts created an interactive map that illustrates how premiums have changed by state and territory as a result of Risk Rating 2.0.
HOMEOWNERS INSURANCE SHOULD ADEQUATELY COVER THESE 5 ITEMS
What does flood insurance cover?
Flood insurance can protect your home’s structure and your personal belongings from damage caused by storm surges, heavy rain, or other events where water accumulates on land that’s usually dry. Here’s an overview of the two types of coverage flood insurance provides:
- Building coverage protects things like electrical and plumbing systems, appliances, installed carpeting, permanently installed cabinets and paneling, window blinds, and furnaces.
- Contents coverage insures your belongings in the home, such as clothes and furniture, portable appliances, washer and dryers, and valuable items (up to $2,500).
NFIP policies provide up to $250,000 in building coverage and up to $100,000 in contents coverage for a residential property. If that’s not enough to cover your home, clothes, furniture, and valuables, private flood insurance may offer higher coverage limits than NFIP policies.
Flood insurance exclusions
Flooding caused by pipes breaking in your home or a sewer backup wouldn’t be covered by flood insurance unless those systems malfunctioned because of a covered natural disaster event. Adding a water backup rider to your homeowners insurance policy could help protect you from drain or sump pump-related damage.
Certain valuables like money and precious metals may also not be covered by flood insurance, even in covered events. Home features, like a deck or swimming pool, may not be included in the policy either, so be sure to carefully look through policy terms to understand what the insurance provider will or won’t help you repair or replace during a covered event.
Flood coverage can also be limited for your basement and crawl spaces. While home systems in your basement, such as heating systems, may be covered, items like personal belongings or carpeting below the “lowest elevated floor” may not be covered.
Is flood insurance necessary?
Making the mistake of not being adequately insured can be financially devastating. If you live in a high-risk area, shopping for flood insurance should be a priority because it can help you get your life and home back in order when disaster strikes.
But flood insurance is still worth having if you live in a low-risk flood area, since it can help protect you in rare flood situations — 25% of flood insurance claims come from people who live outside of high-risk areas, according to FEMA. Plus, living in a low-risk area could mean you qualify for a low premium. FEMA has a webpage where you can search for flood insurance providers by state.
DO YOU NEED HOMEOWNERS INSURANCE?
Catastrophe Savings Accounts
For more financial protection, some states offer Catastrophe Savings Accounts that let you stash money in an interest-bearing account for qualified catastrophe expenses, and those contributions may be tax-deductible. If there’s a storm or flood, you can tap into this account to pay for your insurance deductible or other out-of-pocket costs.
Some rules apply to the account, though. Contributions may be limited; for example, if your homeowners insurance deductible is $1,000, you may be limited to contributing only $2,000 to the account. If your deductible is above $1,000, you may be limited to contributing $15,000 or double your deductible, whichever is less. You could also be hit with a tax penalty if you don’t use the money for qualified disaster expenses.
Looking up state guidelines for Catastrophe Savings Accounts and speaking with an insurance provider can help you choose the right coverage. Flood insurance can help you develop disaster plans that can minimize your financial burden if the unexpected happens.
Credible makes comparison shopping for flood insurance easy. Get quotes from top insurance carriers, all in one place.