Debunking Myths on Flood Insurance and Tips to Save Money

Taking Control of Flood Insurance Costs to Better Protect Yourself

Boy jumping in water conceptual taking control of flood insurance
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Water damage is a major concern for many homeowners. With severe weather patterns impacting homeowners across the country, many people are worried about home insurance claims due to weather-related water damage, like floods.

Home insurance does not automatically cover flood, so if you want flood insurance, you will be paying extra costs for a separate flood insurance policy. If you live in an area that is prone to flood or considered a high-risk flood zone, flood insurance may be a requirement of your mortgage.

Luckily, there are ways you can get cheaper flood insurance. Keep reading for information on how to save on premiums, as well as some common myths about flood insurance. 

Getting Lower Prices for Your Flood Insurance

A 2018 survey conducted by the Insurance Information Institute found that only 15% of Americans have flood insurance. The increased cost of flood insurance may be a factor in whether or not Americans buy it. Finding a policy at a good price is important.

An insurance company considers many factors when deciding how much to charge for your flood insurance policy premiums. One of these factors is whether you are living in a high-risk flood zone. The features of your home and details of your specific situation could also make a major difference in your costs.

However, you have options to help reduce your flood insurance costs, whether you are with the National Flood Insurance Program (NFIP) or private flood insurance. Some of them may or may not work for you, but they will at least help start a discussion with your insurance agent or broker.

Here are three ways you may be able to reduce flood insurance costs:

Private Insurance

Consider private flood insurance, if you live in an area that offers it. Keep in mind that private flood insurance may be less expensive, but there are drawbacks to consider, as well.

Adjusting Your Property

Both private flood insurance and the NFIP may reward you for making flood-conscious adjustments to your property. You can read more about how to reduce NFIP costs on the program's website.

Seeking Federal Grants

The Federal Emergency Management Agency (FEMA) offers grants to help Americans pay for flood mitigation. These mitigation projects could help reduce your insurance costs. You can read more about this on FEMA's website for Flood Mitigation Assistance.

Debunking 3 Common Myths About Flood Insurance

Understanding the different myths on this subject can help you avoid the common pitfalls of flood insurance. Here are three common myths.

Myth: NFIP Only Applies to Special Flood Hazard Areas (SFHAs)

While you do have to live in a community that participates in the NFIP to receive coverage through the program, not all participating communities are SFHAs. In total, more than 22,000 communities participate in the NFIP. If your community isn't one of them, but you would like it to be, contact local leaders like a mayor, city councilor, or county commissioner.

Myth: I Don't Need Flood Insurance Because FEMA Will Cover It

While it is true that some disaster victims will be eligible to make FEMA non-NFIP claims, these payments only apply to certain situations. For instance, a flood victim has to have been hit by an official federal disaster to be protected by FEMA, and fewer than 50% of flooding events are officially declared a federal disaster.

Myth: Only Homeowners Can Buy Flood Insurance

Anyone can be impacted by a flood, whether you own or rent your home. Floods can affect apartments, condos, and townhomes just as much as a detached house. Therefore, flood insurance is available for any kind of homeowner, resident, or business.

Cutting Costs With Private Insurance

If you live in a high-risk flood zone, but your property has not suffered flood damage in the past and is less "at-risk" that other homes in your area, you may want to check out private flood insurance. Private flood insurance premiums can use different rate structures than NFIP. Depending on your circumstances, you may qualify for lower premiums through private insurance. Some non-admitted insurance companies may also offer attractive options that provide more coverage than standard flood policies. Be sure to explore all your options, but keep both the advantages and disadvantages in mind.

Advantages of Private Flood Insurance

Private flood insurance may provide lower rates for homes that were only recently added to high-risk zones, especially if they haven't had significant flood history. The waiting period for private flood insurance is also usually shorter than with the NFIP. High-value homeowners may find that private insurance offers higher coverage limits, as well. 

Disadvantages of Private Flood Insurance

If you leave the NFIP and then decide you'd like to return to it later, you may face rate increases when re-applying for NFIP coverage. You may also lose out on your eligibility for FEMA programs and grants if you do not insure through the NFIP.

It's also important to check with your mortgage lender before switching insurance. Some lenders may not accept your private insurance plan.

Adjusting Your Property to Reduce Flood Risks (and Insurance Costs)

There are adjustments you can make to your property to reduce flood risks. These adjustments could add discounts and reduce your flood insurance cost, both for NFIP and private plans.

Some of the adjustments to your property you may consider include:

  • Elevating machinery or equipment like air conditioners and plumbing above the base flood elevation
  • Reviewing the "flood openings" in your building and ensuring that they meet or exceed the latest building code standards
  • Considering whether your home is best for wet or dry floodproofing (there's an online FEMA handbook with more information on both strategies of floodproofing)
  • Relocating or elevating the entire building (FEMA recognizes that this isn't feasible for everyone, so it has advice for those who can't take this step)

If you have the means to do so, elevating your home can have significant impacts on your premium costs. Elevating a home to three feet above the base ­flood elevation can save a homeowner 60% or more on annual ­flood insurance premiums. Elevating one foot above base flood elevation can save a homeowner up to 30% on premiums.

Depending on the type of work you'll be doing on your property, you may apply for federal dollars to help fund the project. Check the websites for the Hazard Mitigation Grant Program, the Pre-Disaster Mitigation Grant Program, and the Flood Mitigation Assistance Grant Program.

If you don't know what will be best for your property, FEMA has a useful retrofitting tip sheet to help determine what kind of natural disasters you're most at risk for, and how to best mitigate the possibility of damage.

When in doubt, ask your insurance representative how much you can save through methods like retrofitting and see what recommendations they might have.

Community Discounts

FEMA uses a community rating system to offer discounts for communities that are best prepared for flooding. There are many ways that communities can earn these discounts, but broadly speaking, the community action qualifies if it either reduces flood damage, strengthens and supports the NFIP, or encourages a comprehensive approach to flood management.

Increased Cost of Compliance Coverage After Flood

If you are looking into ways of reducing your flood insurance costs after you have had a flood, then the Increased Cost of Compliance Coverage (ICC) may be able to help eligible properties repair and retrofit the buildings to better prevent future flood damage. Check with FEMA's website for ICC coverage to see more details on the types of projects that are covered, and how to receive up to $30,000 in grants.

The Bottom Line

Even though flood insurance can be expensive, being proactive about reducing your flood risk will save you money. Mitigation strategies will help reduce your insurance costs, in addition to possibly preventing hardships like flood damage, repair costs, temporary relocation, and loss of personal items. For more ideas, look into whether you could be using your deductible to save money on insurance

Article Sources

  1. Insurance Information Institute. "Facts + Statistics: Flood Insurance." Accessed April 2, 2020.

  2. Federal Emergency Management Agency. "5 Common Flood Insurance Myths." Accessed April 2, 2020.

  3. Federal Emergency Management Agency. "The National Flood Insurance Program." Accessed April 2, 2020.