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If you own a home, you want to protect your investment as best you can. Homeowners insurance is one way of financially protecting your property from any number of potential perils, such as fire, burglary, hailstorms, or even tornadoes.

Some areas of the country are also susceptible to flooding, which can result in significant damage or even destroy your home. However, standard homeowners insurance policies don’t cover flood damage. That’s why you may want to consider buying a flood insurance policy, especially if your home is located in a flood-prone area.

Here’s what you need to know about flood insurance and what it costs:

What is flood insurance?

Flood insurance is a type of stand-alone policy for your home which covers your personal belongings as well as the structure of your home should floodwaters intrude on your property and cause damage. If you live in an area with a high risk of flooding and have a government-backed mortgage, your lender will require it.

You can purchase flood insurance through the National Flood Insurance Program (NFIP) if you live in one of the 23,000 participating communities with a flood risk, or you may buy coverage through a private insurer.

Keep in mind: After buying a flood policy, there’s typically a 30-day (or longer) waiting period before the coverage will actually kick in. Because of this, it’s wise to plan ahead and purchase flood insurance ahead of rainy seasons like winter.

What does flood insurance cover?

Flood insurance covers water damage from many events, including heavy rain, storm surges, flash floods, and broken pipes. Your coverage will help repair or replace personal belongings in your home or any damage to the home itself. It’s important to note that flood insurance only covers damage that’s a direct result of flooding.

You must purchase dwelling coverage and contents coverage separately. If you only buy dwelling coverage, then only the damages to your home’s structure will be covered after a flood event. Any damaged items in the home would be excluded.

Learn More: Everything You Need to Know About Home Insurance Claims

How much does flood insurance cost?

As with any type of insurance coverage, many variables affect the cost of flood insurance, including your home’s:

  • Age
  • Location
  • Elevation
  • Rebuilding costs

Your home’s flood zone rating (or how much flood risk your area poses) is a major determinant of the cost of your NFIP policy. You can enter your address on the FEMA Flood Map Service Center website to see the flood map for your area and find out your property’s flood risk.

The average annual cost for NFIP flood insurance was $700 in 2019. Policies in moderate-to-low-risk areas were as low as $395 that year.

Keep in Mind: If you purchase private flood insurance, it may come at a higher cost. Shop around and compare quotes to find the best rate for you.

Factors that affect the cost of flood insurance

The greater the risk that your property poses to an insurance carrier, the more you can expect that coverage to cost. But many different factors go into determining the cost of your flood insurance, including the following:

Type of coverage

National Flood Insurance Program policies offer up to $250,000 for residential dwelling coverage and up to $100,000 for your personal belongings. The amount of coverage you select will impact the premium you pay.

In addition, remember that you must purchase these two types of coverage separately. If you opt to only protect your home’s structure, you’ll pay less but won’t receive any financial assistance if a flood damages your personal property.

Since NFIP policies are federally backed, they can often be more affordable than private flood insurance policies in the same area. However, private flood policies may offer higher coverage limits, which you may need if you have a high-value property.

Your policy

If you live in a lower-risk area, you may be eligible to purchase a FEMA Preferred Risk Policy (PRP). PRP coverage is generally cheaper than standard flood insurance, though it’s not available to homeowners or renters in all flood zones. PRP policies are available in fixed combinations of dwelling and contents coverage or contents-only coverage.

Susceptibility to flooding

Aside from your home’s location and flood zone, other factors contribute to its susceptibility to flooding. The greater the risk of flooding, the more you’ll likely pay for coverage.

Older homes are generally more likely to flood than newer properties. This is often due to flood-resistant building styles and materials, which improve each year. Unless you retrofit and further flood-proof an older home, it poses a greater risk than a newer home.

Single-story homes may be more susceptible to flood damages than multi-story homes, and properties with an underground basement also pose more risk. In addition, a home with a slab foundation may be at greater risk than a home that’s elevated on beams, and a stone or brick structure is often less susceptible to damage than a wooden structure.

Your insurance provider

When it comes to NFIP policies, FEMA determines rates, and your rate will be the same regardless of the carrier you choose to underwrite your policy. If you purchase a private flood insurance policy, though, your prices may vary from one carrier to the next. As with all types of insurance coverage, some carriers offer flood insurance at a higher cost than others.

Keep Reading: How to Buy Homeowners Insurance

How to lower flood insurance costs

Flood insurance doesn’t have to be expensive. You can reduce the risk level of your property and lower your flood insurance costs in a few ways.

These can include:

  • Raising your deductible
  • Elevating your heating, cooling, or electrical systems
  • Installing flood vents
  • Elevating your home above flood level
  • Infilling your basement
  • Dry floodproofing your home with waterproof coatings or coverings
  • Adding floodwalls or levees

Some of these mitigation strategies are more involved than others. Depending on your flood risk and the cost of your premiums, though, they may be worth it to not only unlock lower insurance costs but potentially save your home in a flood situation.

What is Risk Rating 2.0?

In 2021, FEMA enacted a new risk-rating methodology called Risk Rating 2.0, which will impact flood insurance premiums for homeowners everywhere. The aim of this new rating methodology is to make assessing insurance rates more equitable and accurate by addressing more flood risk variables, as well as making rates easier for consumers to understand.

Risk Rating 2.0 was applied to new policies purchased on or after Oct. 1, 2021. The methodology was then implemented for existing flood insurance policies renewing on or after Apr. 1, 2022.

Learn More: What You Should Know About Insurance Scores

Is flood insurance necessary?

Nearly every home has some level of flood risk. And a standard homeowners insurance policy alone won’t protect your property from that risk, since traditional policies exclude floods from coverage.

If your home is in a high-risk flood area, your mortgage lender will likely require you to have flood insurance. But even in a low-risk flood area, having at least minimal flood insurance coverage can help add peace of mind and protect you in the case of a rare flood event. This type of coverage can often be a worthwhile investment for your property — a single inch of floodwater can cause as much as $25,000 in damage to your property, according to FEMA.

Certain states also offer a Catastrophe Savings Account to homeowners. These tax-advantaged accounts can either be typical savings accounts or money market accounts, and you canuse the funds to self-insure your property against a flood. This money can help you pay a flood insurance deductible or pay for any damage that your policy doesn’t cover.

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About the author
Stephanie Colestock
Stephanie Colestock

Stephanie Colestock is a Washington, D.C.-based writer who has more than 11 years of experience in writing about investing, business, and personal finances. She’s contributed to outlets such as Yahoo! Finance, MSN, Investopedia, Credit Karma, Credible, and more.

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