Because the risk of flooding is great in many areas around the U.S., flood insurance is typically a separate policy from most homeowners insurance coverage. As such, it costs extra beyond your regular home insurance. But that also means you have options for the kind of flood insurance coverage you want to pay for. Here are the main types of flood insurance, and how they affect price of coverage.
Types of flood insurance coverage
Depending on your coverage, flood insurance can protect you from damage to a structure, damage to the contents of a structure, or both. A single inch of floodwater can result in thousands of dollars of repairs, so determining if you need flood insurance can be a huge step towards protecting your assets.
Most flood insurance policies are backed by the National Flood Insurance Program (NFIP). You should take note that coverage is limited to $250,000 for your home and $100,000 for personal property inside of it. If you need more coverage, you should get a quote from a private flood insurance provider. It may or may not be less expensive, depending on varying factors.
What are flood zones?
When considering location in terms of flood insurance, you need to keep in mind several things including the state your home is located in, the terrain on which your property stands, and the flood zone. Some states have higher rates due to the probability of natural disasters and instances of insurance claims.
For example, if your home is in a coastal state like Maine or North Carolina, chances are higher you might incur floodwater damage from a storm. However, if you live in the same state, but your property is on top of a mountain or is further inland, your chance of flood damage is lower.
Because there are so many factors to consider in terms of location, FEMA developed three designated flood zones. High-risk flood zones are categorized as Zone A, which means the area has a 25% chance of experiencing a flood during a standard 30-year mortgage period. It also means the zone has an annual one percent chance of flooding. Lenders require flood insurance in Zone A.
Moderate to low-risk zones are labeled as Zone B and lenders do not require flood coverage. However, it is recommended you look into protection as there is a slight risk. Because the risk is lower, the cost should be less.
Finally, undetermined flood zones are categorized as Zone C. Having a home in Zone C does not equate to cheaper flood insurance. It means it is unlikely, but still possible for you to experience flood damage. Because the risk is undetermined, insurance may actually cost more in this zone.
The older your house is, the higher flood insurance may cost. Often, this is because older homes are not outfitted with amenities that protect from flooding. For example, if your home is located in a Zone A designation, your policy may cost less if you have flood openings in your base floor. If water gets into your home, the openings can get the water out quickly before significant damage is done.
Also, newer homes tend to be built above base flood elevations, while more often older homes were built before flood zoning was even mapped out in an area, so this was not a consideration at time of construction.
Another factor that can greatly affect flood insurance rates is whether your home has a basement. If it does have a basement or crawlspace, you can expect your policy to cost up to 20% higher than a house without one.
Something else to look for is underground utilities. For example, if your plumbing or water heater are located below the base flood elevation, you can relocate them to a ground level utility shed and potentially save money.
When pricing and purchasing flood insurance, remember several factors can determine policy costs, including your home’s location, age, and the desired coverage. You should also take into account the risks and losses you might incur without flood protection when deciding if flood coverage is right for you.