Roughly 15 million U.S. homes risk of flooding. That’s about 70% more than FEMA estimated in the past and one in ten of all properties. Climate change worsens the situation.
Seasoned homeowners know that home insurance offers little if any flood coverage. So they have flood insurance. Others learn the hard way—through flooded homes.
These folks will want to buy their first flood insurance immediately following the flood. Can they afford it, though? What factors affect flood insurance costs?
1. Flood Risk
Flood risk is identified by FEMA’s alphabetically labeled zones (A, B, etc.). Insurers use these designations to determine flood risk and set rates and terms for flood insurance coverage.
Know that monitoring your flood zone designation for any changes better prepares you for possible floods. It also ensures that you always have optimal flood insurance—just in case.
2. Home Location
Home elevation bears heavily on flood insurance costs. AE flood zones have the highest premiums outside coastal areas. Most AE zone structures have negative base flood elevations (BFE).
BFE is the calculated elevation of floodwater’s anticipated rise. It’s particularly problematic for low-lying areas throughout the country. FEMA flood maps indicate this (if available and up-to-date).
Those living in flood zones pay a lot, no matter what. And buying AE flood insurance anywhere is costly. If you need help finding AE flood insurance, contact Betterflood.com.
Flood insurance cost depends on your state of residence. Factors like weather, proximity to safety resources, and crime data also affect flood insurance rates.
3. The Home’s Age and Design
Certain home construction types cost more to insure generally than others. They’re more prone to perils such as fire and other damages covered by most homeowners’ insurance.
Still, older homes face a greater risk for any peril, including flooding. Their repair and replacement costs are much higher than those of newer homes.
Old homes tend to incur more significant damage, thus needing more extensive repair (or replacement). Insurers must anticipate these factors when issuing coverage and determining premiums, deductibles, etc.
4. Variation in Coverage Types
One factor to note is how private flood insurance and government flood insurance (NFIP) differ.
The National Flood Insurance Program (NFIP), under FEMA, provides most U.S. residential flood coverage. The federal government underwrites NFIP. Even so, you can purchase flood insurance through most homeowners’ insurance providers.
NFIP is not without its problems. This government-sponsored insurance doesn’t offer protection known as “loss-of-use coverage,” which covers additional living expenses for those needing to relocate. Many private flood insurers do cover these expenses.
Private flood insurance has its disadvantages too. Insurance companies can opt not to renew a policy if the insured party presents too great a risk. In contrast, the NFIP cannot cancel coverage.
5. Deductibles and Premiums
Flood insurance deductibles fall into two components: building and contents. Building deductibles are for structural flood damage, e.g., the foundation or flooring.
Content deductibles are for personal property damage inside the structure of the insured’s home, e.g., furniture and clothing.
With NFIP flood insurance, the deductible and premium adhere to government standards. Policies offer flood insurance premium discounts of up to 40%. The discount depends on which building and contents deductibles the insured has selected.
Private flood insurers ordinarily offer either a $2,000 or $5,000 deductible for each type of coverage.
Flood Insurance Is Serious Business
Homeowners ignore the possibility of a flooded home at their peril, believing they’re beyond possible floodwaters. But speculation is one thing, reality another. Flooding usually comes unexpectedly.
Yes, some need flood insurance more than others. Those at lower risk might get away without it. It’s always a gamble, though, and it costs little for those with minimal cause to fear flooding.
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