Many homeowners understand the importance of having homeowners insurance in place. This coverage protects against financial loss due to damage or theft, and not only covers the structure of the residence, but also some – if not all – of the belongings within a home.
However, conventional homeowner’s insurance does not typically cover damage caused by a flood. For this reason, flood insurance is an additional consideration for homeowners, specifically those who live in regions of the country where the potential for a flood is high.
The national average cost of flood insurance is $707 through the National Flood Insurance Program, according to the most recent statistics compiled by FEMA and the Department of Homeland Security. However, flood insurance costs vary greatly for homeowners depending on where the property is located and the past claims activity for that residence.
Here’s what you can expect from a flood insurance policy in terms of cost and rates in general.
- Average Cost of Flood Insurance
- Flood Insurance Cost Factors
- What Flood Insurance Covers
- Questions to Ask
How Much is Flood Insurance on Average?
The risk of flooding in a home dictates the true cost of flood insurance for homeowners, but there are average cost estimates that provide an idea of the expense each year. The national average, as mentioned above, is $707 per year for flood insurance, but this amount varies depending on the actual risk level of the home.
Lower-risk homes, or those located in a region with less likelihood of flooding over time, have an average cost of $405 per year for homes without a basement. Homes with a basement in the same risk category have an average cost of flood insurance of $452 per year. These averages assume a maximum coverage of $250,000 for the structure of the home and up to $100,000 of personal belongings within the home.
For high-risk homes, the average cost of flood insurance is far higher. According to Kiplinger’s 2016 data, a high-risk residence in a flood area may have an annual premium of $2,500 for the same coverage mentioned above.
Some regions of the country dictate a higher average cost of flood insurance than others given their proximity to large bodies of water, the potential for hurricane weather, or other natural forces that may lead to flood conditions. New England homeowners, for example, face the highest average cost of flood insurance, while states in the southeast and northwest have the lowest average cost.
Flood Insurance Cost Factors
According to FEMA, there are several factors that influence the cost of flood insurance for homeowners. These include:
- The year the home was built
- Occupancy of the home
- Number of floors, including basement
- Location of personal belongings in the home
- Policy deductible and coverage amounts
- Flood risk of the property
The most significant influence on the cost of flood insurance is the property’s category of risk, broken down into three sub-categories: moderate-to-low risk, high-risk, and undetermined risk.
- Moderate to Low Risk – Moderate-to-low risk properties have a lower average cost of flood insurance because the coverage is not required, nor is it likely that a flood will occur. These areas are also known as Non-Special Flood Hazard Areas, or NSFA. There is a probability of between 0.2 percent and 1 percent of a flood each year for moderate-risk, and less than or equal to 0.2 percent for low-risk properties.
- High-Risk Areas – High-risk properties are located in known flood zones and are often required to have some degree of flood insurance in place. These areas are known as Special Flood Hazards Areas, or SFHA. In these regions, there is a greater than 1 percent chance of a flood each year. These premium costs may be higher than the average because of the risk of flooding involved.
- Undetermined Risk Area – Unknown or undetermined risk zones have no identified degree of risk for flooding because an analysis has yet to be conducted. However, premiums may be higher because of this categorization.
What Flood Insurance Covers
Unlike homeowner’s insurance that covers damage from theft, fire, natural disasters, or other accidents in the home or on a homeowner’s property, flood insurance specifically protects against financial loss because of a flood.
According to Consumer Reports, most flood insurance policies cover essential systems in the home, such as electrical, plumbing, heating and cooling systems, as well as water tanks and sump pumps. Some appliances may also be covered under flood insurance, such as refrigerators, stovetops and ranges, dishwashers, and washing machines. Some flood insurance policies may also protect against damage to window treatments such as blinds or curtains, carpeting, wood floors, and paneling.
Homeowners may be surprised to learn that flood insurance also covers the foundation of the home, walls, anchoring systems, and detached garages or sheds. In some policies, insurance is also available for personal belongings inside the home, up to certain limits. However, these covered items and structures are typically only included in a claim when damage is caused by certain types of flooding. For instance, a sewer backup that causes flooding may not be covered.
Some flood insurance policies have specific exclusions that are not covered at any time. Any damage above the policy limits is not typically covered by a flood insurance policy. For instance, the federal flood insurance program offers protection up to $250,000 for building structures and $100,000 for personal belongings. Financial losses exceeding these amounts are covered by the homeowner or lost permanently. Additionally, specific types of personal property, including some large electronics, may not be covered in a flood insurance policy.
Important Questions to Ask Your Flood Insurance Agent
When securing a flood insurance policy, it is crucial to ask specific questions relating to available coverage. Homeowners should start the conversation by requesting a quote based on their specific property location, as well as the amount of coverage they are requesting.
The amount of coverage may be difficult to ascertain, but the flood insurance agent should provide some guidelines for calculating this amount. In addition to pricing, homeowners need to be fully aware of any exclusions that may be part of the policy, the amount of the deductible, and any potential for insurance premium increases in the future.
Flood insurance can make a significant difference in the level of protection a homeowner has against financial loss due to flooding. However, it is important to recognize the cost of flood insurance, the need for it based on the location of the property, and the amount of coverage available for the price.
Melissa Horton has worked in financial services for the past 13 years, helping clients understand the often complex vehicles available for both lending and investment needs. She is passionate about financial literacy and strives to educate clients and the general public to empower them in making smart financial decisions.
“The Invading Sea” is a collaboration of four South Florida media organizations — the South Florida Sun Sentinel, Miami Herald, Palm Beach Post and WLRN Public Media.