Does Your Home Need Flood Insurance?
Flooding is the most common and costly natural disaster in the U.S., so you aren’t alone facing this challenge. Many homeowners live in flood prone areas.
Homeowners and renters insurance typically don’t cover flood damage. You’ll need to purchase a separate flood policy. Flood victims sometimes qualify for low-interest disaster loans or government grants, but insurance provides the best protection.
Your mortgage lender also may require you to obtain flood insurance if you live in a flood zone. Typically, that coverage must equal at least what you owe on your mortgage and meet certain legal requirements.
Assessing your risk
The Federal Emergency Management Agency’s National Flood Insurance Program (NFIP) can help assess your flood risk. The NFIP runs flood mapping for the entire country and determines where the highest and lowest risks of damage are.
The zones are rated using letters:
- Zone A has the highest risk and generally requires flood insurance.
- Zone Z is used for coastal areas and may require coverage too.
- Zones B, C and X have a moderate or low risk of flooding. But note that even people who live in these zones can — and do — sustain damage.
You will need to determine how much damage a flood would cause, based on the size of your home and the depth of the water. You may be surprised at the results. For example, according to FEMA, just four inches of water in a 2,500-square-foot home would likely result in $38,552 in damages!
While NFIP sponsors most flood insurance, only those who live in NFIP-participating communities can purchase this coverage. Your insurance professional can determine if your city or county participates and then show you the types of coverage available for your property.
Covering high-value homes
High-value homes, such as beach or lakefront property, may need excess coverage since the maximum NFIP protection for a residential building is $250,000, with limits for contents topping out at $100,000.
Some insurers offer excess flood insurance to supplement regular NFIP coverage. Private policies also are available for expensive properties (valued at more than $1 million) and for owners who meet certain net-worth standards.
Bear in mind that excess flood insurance can be expensive. Prices vary depending on your home’s age, where it is located, whether it is elevated, its distance to the water, which way your building faces, and how high a deductible you are willing to pay.
Risk rating 2.0
Major changes are coming for NFIP coverage. In early 2019, FEMA announced plans for a new Risk Rating 2.0 program; implementation has been delayed to October 2021. This new program will change the way FEMA prices coverage, so let’s discuss the impact it could have on your policy.
FEMA is developing a more sophisticated method for rating and pricing policies to replace the current rating system from the 1970s. The new plan will incorporate more factors, such as different types of floods and the cost to rebuild.
Depending on where your house is located and its value, your rates may go up under the new program. FEMA says it will comply with existing caps on premium increases and help transition policyholders who may face substantial increases.
Keeping your costs down
Be sure to consider these factors when discussing rates:
- Is your community enrolled in FEMA’s Community Rating System? If so, you may qualify for a discount based on your community’s efforts to reduce the risk of flooding in your area.
- Have you elevated your home? Owners who elevate their homes three feet above the base flood elevation can expect to save 60% or more on premiums, according to FEMA. If your property is required to be in compliance with local floodplain requirements, you may be eligible for the Increased Cost of Compliance program, which can help pay for elevating a building after a flood. FEMA also has a grant program to help elevate homes.
- Have you retrofitted your home by floodproofing? Even if it’s not possible to elevate your home, there are still measures you can take to make your dwelling more flood resistant. Consider raising the utilities, installing basement infill and flood openings, and placing valuable contents above flood level. These can reduce your premiums.
Speak to your insurance professional about flood insurance; they can help you better understand your risk and how to protect against flooding. With severe weather and natural disaster threats across the U.S., you owe it to yourself and your family to be prepared. Having adequate flood coverage is a smart first step.
Timothy G. Russell, CPCU
trussell [at] therussellagency [dot] com
The Russell Agency, LLC
317 Pequot Avenue
PO Box 528
Southport, CT 06890
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