Flood Insurance Myths and How to Save Money

Take 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 may be a major concern for homeowners living in wet weather regions and beyond. With severe weather patterns impacting homeowners across the country, many may be worried about home insurance claims due to weather-related water damage, like floods.

Home insurance does not automatically cover flood damage, 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. First, learn some of the more common myths about flood insurance—and why they're not true—and then how to save on your monthly premium. 

Common Myths About Flood Insurance

Understanding the different myths surrounding flood insurance can help you avoid common pitfalls.

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. That means renters can get flood insurance, too.

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

While you do have to live in a community that participates in the National Flood Insurance Program (NFIP) to receive coverage through the program, not all participating communities are SFHAs. In total, 23,000 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: Flood Insurance Isn't Necessary 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.

How to Save Money on Flood Insurance

The Insurance Information Institute found that only 15% of Americans had flood insurance in 2018. It also found that the average amount of flood coverage was $257,000, with an average premium was $642.

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 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.

Purchase 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. You may be able to purchase it through your home or auto insurer, too. And if you increase your deductible, your premium may be lower.

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

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 the 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.

If you're looking for private flood insurance, FloodSmart offers a directory that may be able to help.

Advantages and Disadvantages

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. 

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.

Adjust Your Property

Both private flood insurance and the NFIP may reward you for making flood-conscious adjustments to your property. These adjustments could add discounts and reduce your flood insurance cost, both for NFIP and private plans. These adjustments include elevating your property and utilities, installing flood openings, filling in basements, or relocating:

  • Elevate machinery or equipment like air conditioners and plumbing above the base flood elevation
  • Review the "flood openings" in your building and ensure that they meet or exceed the latest building code standards
  • Consider whether your home is best for wet or dry floodproofing (there's an online FEMA handbook with more information on both strategies of floodproofing)
  • Relocate or elevate the entire building (FEMA recognizes that this isn't feasible for everyone)

If you have the means to do so, elevating your home can have significant impacts on your premium costs. Elevating 1 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.

f you don't know what will be best for your property, FEMA has a useful retrofitting guide 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 and Federal Grants

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.

FEMA also offers a Flood Mitigation Assistant Grant to help Americans pay for flood mitigation. These mitigation projects could help reduce your insurance costs. Grant recipients are chosen based on the ranking, eligibility, and cost-effectiveness of the project. FEMA also offers the Hazard Mitigation Grant Program and the Pre-Disaster Mitigation Grant Program, too.

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.

Key Takeaways

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