You might be asking yourself, “Do I need Flood Insurance”? Understanding the factors at play within your geographical area can help you make an informed decision on whether or not investing in flood insurance is right for you.
What Qualifies as a Flood?
FEMA defines flood as a general and temporary condition of partial or complete inundation of 2 or more acres of normally dry land area or of 2 or more properties.
Flood Insurance does not cover sewer and water backups into your home through plumbing or sump pump overflow. This is a coverage you can add to any homeowners insurance policy and we highly recommend everyone has it. It’s typically referred to as Sewer/Water Backup.
Understanding Flood Zones and Why They Matter
Flood zones are areas designated by FEMA based on the likelihood of flooding. If your property is located in a high-risk flood zone, you may be required to purchase flood insurance. If you have a mortgage on your home your lender may also require you to have flood insurance depending on your zone.
However, even if you aren’t in a high-risk zone, it’s still important to consider purchasing flood insurance as flooding can happen anywhere and can be extremely costly.
According to FEMA, about 25 percent of all flood insurance claims come from areas with low-to-moderate flood risk. You’re still 5 times more likely to have flood damage than a fire.
How Do I Find My Flood Zone?
The first step is to know your flood zone. All homes have flood risk. It’s just a matter of determining your level of risk. FEMA has a website that you can enter your address to find your flood zone. The only downside is it’s kind of technical and can be difficult to read.
Here’s the best way we found to navigate their website:
- Go to the FEMA Flood Map Service Center
- Enter your home address and click search. You’ll be brought to a map.
- Click “Dynamic Map”. This will bring up a PDF map.
- Your flood zone should now be displayed on the map.
FEMA reports that 99% of U.S. counties were impacted by a flood event between 1999-2019.
Where to Buy Flood Insurance
There are 2 main channels to purchase flood insurance.
- The National Flood Insurance Program (NFIP)
- Private insurance companies.
The NFIP is a government backed program. Since competition drives down costs, you may find the private insurance company route better for you. If you have a mortgage that requires you to have flood insurance, you’ll want to check their requirements first before starting your policy.
The NFIP program also has a 30 wait period. This can be waived if you’re purchasing or refinancing a home.
Private insurance companies can offer NFIP policies as well as their own. The only difference is the NFIP policies are underwritten by the federal government.
Coverage Available
There are 2 main coverage parts to the policy:
- Building
- Contents
Building coverage will cover the physical structure of your home and its foundation, as well as the electrical and plumbing systems, central air conditioning, and major appliances. Contents will cover personal property loss.
The NFIP program will only allow up to the following limits:
Building: $250,000
Contents: $100,000
Whereas, private insurance companies could allow up to the following limits and possibly more:
Building: $4,000,000
Contents: $500,000
As you can see, the NFIP coverage limits will not be sufficient for everyone. Private insurance companies will offer more customizable options.
There are different coverage limits for multi-unit residential buildings and commercial structures. These are going to vary depending on the program and what insurance company you choose.
How Much Does Flood Insurance Cost?
Flood insurance premiums vary based on factors like the property’s location, the type of coverage selected, and the property’s flood risk. According to the National Flood Insurance Program, the average flood insurance policy costs around $700 per year. However, this number can increase or decrease depending on the individual property and its specific needs.
As we mentioned before, private insurance company programs may be able to offer better pricing due to them competing in the free market. Our agents can help you investigate and find which one strikes the best cost/coverage balance for you.
Can I Add Flood Insurance to My Homeowners Insurance?
Typically, no. However, we have heard of some companies out there wanting to offer it as an endorsement that can be added to your homeowners insurance policy. For now, 99% of the time the answer is no but check with your agent to verify.
Should I Buy Flood Insurance?
So, assuming you’re not required to purchase flood insurance based on your flood zone, this is going be be determined by your level of risk tolerance. Naturally, some people are more risk tolerant than others.
Do you have an emergency fund? If not, that may sway your decision. The average FEMA flood claim payout was about $32,000 between 1999-2019. These claims tend to be very costly.
Our personal opinion would be if you’re in a flood plane that is anything other than low risk, we would always recommend purchasing the policy. If you’re low risk, it’s a case-by-case decision.
Where is The Best Place to Buy Flood Insurance?
With all the options available to you we would suggest working with a trusted independent agent. They’re going to be able to access the most options to find the best fit for you.
If you work with one of the big insurance companies, whose commercials you see on TV, it’s likely they’re a salesperson for that company and may have biased opinions. They don’t have the options and flexibility of an independent agent. Just as the name suggests, these agents are independent of the insurance companies. This is what we do and we’d love to talk!
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