Debunking Myths on Flood Insurance and Tips to Save Money
Taking Control of Flood Insurance Costs to Better Protect Yourself
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.
There are ways you can get cheaper flood insurance and save money on your flood insurance premium.
Getting Lower Prices for Your Flood Insurance
According to the Insurance Information Institute, 12 percent of Americans have flood insurance. The increased cost of flood insurance may be a factor in whether or not you buy it. Finding a policy at a good price is important.
When the insurance company figures out the premium to charge for your flood insurance policy it takes into consideration many factors. The most common is whether you are living in a high-risk flood zone.
Even though homes may be "lumped" into a certain area by flood risk, the features of your home and details of your specific situation could make a major difference in your costs.
Here are several options to consider to help you reduce your flood insurance costs whether you are with the National Flood Insurance Program (NFIP) or Private Flood Insurance.
3 Homeowner Tips to Reduce Your Flood Insurance Costs
In this article, we review various general options, some of them may or may not work for you, but they are good springboards to a discussion with your insurance agent or broker to help you consider how you can reduce costs on your property insurance when you need flood insurance. The 3 top ways to reduce flood insurance costs are to consider the following options:
- If you live in an area that has private flood insurance, look into this option with your insurance representative because it may be less expensive. We discuss the advantages with pros and cons of this below.
- Whether you are insured through private flood insurance or the National Flood Insurance Program, you could benefit if you make adjustments to your property, read on to find out about some basic changes you can make
- Look into FEMA Grants and Community discounts for flood mitigation measures
Debunking 3 Common Myths About Flood Insurance
Understanding the different myths about flood insurance can help you. Here are 3 common myths:
- Only those in a special flood hazard area (SFHA) can buy flood insurance. False, anyone is more than 22,000 communities participating in the NFIP can purchase flood insurance. You do not have to be in a special flood hazard area. Check your various options, as discussed throughout this article.
- I don't need flood insurance if I will be protected by FEMA. False, before FEMA non-NFIP claims kick in, you may have to wait for the area / incident to be declared a federal disaster. It doesn't take a federal disaster to have rain water or flood impact your home. According to FEMA, "Federal disaster declarations are issued in less than 50% of flooding events".
- Only homeowners can buy flood insurance. Anyone can be impacted by a flood, even condo owners and renters. So flood insurance is available to renters and condo owners as well as homeowners and businesses.
Getting Cheaper Flood Insurance Through Private Insurance
If you live in a high flood risk zone, but your property has not suffered a lot of 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 take into consideration different rate structures and may result in lower premiums, some non-admitted insurance companies may also offer options that provide more coverage than standard flood policies. Be sure and explore all your options.
Advantages of Private Flood Insurance:
Private flood insurance may provide lower rates for homes that were recently added to high-risk zones, but haven't had significant flood history. The waiting period for private flood insurance is less than the NFIP and the coverage limits can be higher which protects you better if you have a high valued home.
Disadvantages of Switching to Private Flood Insurance to Save Money
Before you switch to private flood insurance to reduce flood insurance costs, consider the following potential disadvantages:
- If you leave the NFIP program and then decide you'd like to return to it later, you may face rate increases when you go back to NFIP.
- Mortgage lenders may not accept your private insurance plan, so make sure your mortgage company will accept your flood insurance before you make any changes or decisions.
- You may not be eligible for the FEMA programs and grants below if you are not with the NFIP.
Making Adjustments to Your Property to Reduce Flood Risks and Insurance Costs
There are adjustments you can make to your property to reduce flood risks. If you are with the National Flood Insurance Program or Private Insurance some of these adjustments could add discounts and reduce your flood insurance cost.
Getting Rid of Flood Insurance Surcharges and Extra Costs
Some of the adjustments to your property you may consider include:
- Elevating machinery or equipment that service your home to a location above the base flood elevation. This may include the air conditioning, electrical, heating, ventilation or plumbing among other things. When these items are situated below the base flood elevation, you may have a surcharge on your flood insurance premium.
- Review the "flood openings" in your building. There are different building codes for buildings within a flood zone. According to FEMA, when your flood openings do not meet the building code standard for your zoning to 100 percent you will have higher costs. Making the necessary adjustments will save money on your flood insurance and reduce the price.
- Consider Wet and Dry Flood-Proofing. This can include using flood damage resistant materials, elevating machinery (as mentioned above) and a variety of other techniques that can improve the design of your home.
- Relocation of the building on the property or Elevating the building—elevating the building is a major endeavor, however, in some cases, it may make sense for you, especially if you have access to assistance grants, as discussed below. If you can not elevate the building, you can also check out this information.
According to FEMA, an elevated home, 3 feet above the base flood elevation, can save 60 percent or more on annual flood insurance premiums. Elevating 1 foot above base flood elevation can save up to 30 percent.
FEMA has a really useful tip sheet to help you decide what kinds of adjustment you may be able to make. You can find it here. You can also ask your insurance representative how much you can save by doing different things and see what recommendations they might have.
Depending on the preparedness of a community for floods, FEMA offers discounts to certain communities using a community rating system. The discounts for each community can be found on the FEMA website.
Assistance Grants From FEMA
The cost of doing repairs or renovation to flood-proof your home may seem more expensive than the actual cost of your flood insurance, but there are cases where you may be eligible for assistance from FEMA for making these improvements. In FEMA's Hazard Mitigation Assistance Programs (HMA), you can look into the Pre-Disaster Mitigation Program (PDM). The goal of the PDM is to help States, Communities, and territories reduce risk from disaster before it happens which also then would reduce the cost of the disasters on Federal funding programs. It is worth finding out if your state has any assistance grants available to help in your area.
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 may be able to help with eligible properties in the cost of elevating the property. Elevating the property can result in significant cost reductions on your flood insurance costs.
Proactive Ways to Reduce Flood Risks
Even though flood insurance can be expensive, getting involved in proactive ways of reducing your flood risk will save you money. Avoiding water damages from flooding will not only save money on your actual insurance cost but may prevent additional hardships by preventing you and your family from having to suffer the damages after a flood, as well as temporary relocation, and loss to personal items you may not be able to replace. For additional ideas on saving money on insurance, you can also check out our article on Using Your Deductible to Save Money on Insurance.