Flood insurance covers you against the peril of rising waters in areas that are normally dry. This could be from tidal water surge, ground water from excess rainfall, or runoff. These losses from water are never covered by a standard home policy. Flood insurance covers two basic items: Building & Contents.
The National Flood Insurance Program which is administered by FEMA offers a maximum of $250,000 of building coverage and $100,000 on contents under the standard program.
FEMA gathers information over time based on how flood affects certain areas and then creates maps known as FIRMs (Flood Insurance Risk Maps). While there are many different designated flood zones, typically you will see either X, A, or V.
An area of minimal flood hazard is typically known as an X zone where the chance of flood is 0.2% or less annually. This is a 1-500 year risk zone.
A SFHA (Special Flood Hazard Area) is an area where there is a 1% chance annually for a flood to occur. This is a 1-100 year risk. The most common zones you will see in a SFHA are designated by letters A and V.
You can determine if you are in a special hazard flood area by visiting FEMA's website - Try it!: FEMA Flood Map Service
If you are in an X flood zone, a preferred risk policy with maximum coverages on both building and contents is around $500 a year. Believe it or not, approximately 20% of annual flood claims are in these "low" risk areas.
If you have a home mortgage or are looking to obtain a loan, you will be required to buy a flood insurance policy to protect the bank's collateral on a home in an SFHA. While looking at the map, if any part of a designated SFHA is touching your house, even if it is only a corner of your deck you will be forced to carry the insurance on the whole house! In cases where it is extremely difficult to tell based on an online map, a licensed surveyor may have to evaluate whether or not your house is touching a SFHA or not.
And the rate is determined in a simple fashion; How high flood waters are anticipated to rise (base flood elevation) in relation to the lowest rated floor of your house. If you have a raised house, the cost of the flood insurance is obviously decreased drastically. If your house was built prior to 1974 or before your community implemented a flood map (Pre-FIRM), then you do not need an elevation certificate to obtain a quote through the NFIP. However, if your house was built Post-FIRM, you will be required to have a valid elevation certificate completed by a licensed surveyor in order to obtain a rate with the NFIP. In certain cases, an elevation certificate can be beneficial for Pre-FIRM houses as well.
Flood insurance is an exceedingly expensive insurance to carry. Historically, FEMA's National Flood Insurance Program has been the only place to obtain the insurance. The program has struggled for years to just break even in terms of overall cost with the severe natural disasters we have experienced in the past years (think Irene, Sandy, Harvey, Irma). Insurance costs under the NFIP have been increasing on an average of 11-15% a year. By law, flood insurance premiums can rise 18% max year over year on households.
At the maximum $250,000 of building coverage, no contents, and a $5,000 deductible the average cost on a Pre-FIRM house is about $3,500 with the NFIP. Now do a simple table and add 15% a year to that number over 30 years.
The reality is that in most cases, you lose serious purchasing power buying or holding a house in a flood zone.
There is no telling when the NFIP will stop increasing its rates, either. It has been steadily increasing for years now!
**However, as of late there are now private market carriers who are coming into the marketplace to try and offer more favorable rates. Private market flood does not require elevation certificates to quote (although they can still help) and they have no waiting period to purchase a policy. If you are in an A zone, sometimes they come out hundreds & sometimes thousands of dollars cheaper. They are designed to mimic the policy NFIP offers and more and more lenders are accepting these policies for the flood insurance requirement.
At Summit, we have carriers such as Johnson & Johnson, DUAL & Lexington that offer these flood policies.
If you have a flood policy with the NFIP currently, we encourage you to call us to see how much you can save in an alternative market.
If you wish to learn more about these products and you are in a flood zone, let us give you a detailed comparison of the different flood products out there. The private market offerings are a game changer!
Call us or send an email with your name and address. That's all we need!