The average cost of flood insurance from the National Flood Insurance Program (NFIP) is $995 a year, according to a Forbes Advisor analysis of flood insurance rates. Many homeowners assume their homeowners insurance covers flooding. but that assumption could be an expensive mistake.
Standard home insurance does not cover flood damage.
Flooding is the most common natural disaster in the United States, affecting 99% of counties between 1996 and 2019, according to FEMA. just 1 inch of water can cause $25,000 worth of damage to a home. but floods are often more devastating than that. The average payment for flood claims from the National Flood Insurance Program (NFIP) in 2019 was $52,000.
since so many homes in the us. uu. are at risk of flooding and subsequent financial disaster, you’d think more homeowners would have flood insurance. unfortunately, it is quite the opposite. An estimated 85% to 95% of homeowners do not have flood insurance, according to the National Association of Insurance Commissioners.
flood insurance costs by state
Flood insurance costs vary based on multiple factors, including where you live, the cost to replace your home, and how much coverage you buy.
These are the average annual flood insurance costs by state for a National Flood Insurance Program policy, based on a Forbes Advisor analysis of flood insurance rates.
average cost of flood insurance by state
most expensive states for flood insurance
The most expensive state for flood insurance is Vermont, with an average cost of $1,610 a year. Here are the five most expensive states for flood insurance:
- rhode island
- west virginia
- south carolina
- the materials your home is made of. For example, masonry walls perform better in floods compared to wood frame walls, which can result in higher rates lower flood insurance.
- building occupancy. the type and use of your building will be factored into your rates.
- number of floors. buildings with more floors distribute the risk of flooding compared to a single-story building.
- machinery and equipment. Elevating equipment such as water heaters and central air conditioning units above the first floor reduces the risk of damage to your machinery and equipment.
- base type
- replacement cost
- frequency of a variety of flood types
- distance to water
- if you have a federally backed mortgage and live in a special flood hazard area within an nfip community
- if you live in a high-risk flood area and have received federal disaster assistance and want to be considered for any future federal disaster assistance
- your lender requires flood insurance
- basic policy, which means an alternative to fema flood insurance.
- excess policy, which will provide additional coverage on top of your base fema policy. For example, the NFIP policy limits for building coverage is $250,000, but you may want $500,000 coverage. an excess flood insurance policy could cover the extra $250,000.
That doesn’t mean you’ll always pay more if you live in those states. your risk of flooding is a major cost factor. Homes in high-risk areas cost more for flood insurance than homes with a lower flood risk.
cheaper states for flood insurance
The cheapest state for flood insurance is Florida with an average cost of $624 per year. Here are the five cheapest states for flood insurance:
factors that determine the cost of flood insurance
Here are the common factors that determine flood insurance costs:
Flood insurance costs are largely based on your property’s flood risk. Homes that have a higher flood risk will pay more for homes with a low flood risk.
for example, the fema 2.0 risk rating takes into account the elevation of your house, the type of foundation, the height of the first floor and the distance to the water.
characteristics of the building
Insurers will also take into account the physical characteristics of your building, such as:
The type of coverage on your flood insurance policy influences rates. For example, you can buy a building-only policy, a contents-only policy, or both from the NFIP. You’ll pay more for flood insurance if you buy building and contents coverage compared to a building-only policy.
types of coverage and amounts
how much coverage you buy influences costs. For example, a private flood insurance policy that offers $1 million in construction coverage will cost you more than an NFIP policy with $250,000 in construction coverage.
Like other types of insurance policies, a flood insurance policy will have lower costs if it has a higher deductible. An insurance deductible is subtracted from an insurance company’s claims payment, so if your home has $50,000 in flood damage and you have a $2,000 deductible, the insurer will pay you $48,000 in damages.
Insurance companies do not charge the same for coverage. one flood insurer may charge much higher rates for the same coverage than another insurance company. That’s why it’s vital to shop around and get flood insurance quotes from multiple insurers when shopping for a private flood insurance policy.
what is risk rating 2.0?
the pricing methodology for fema flood insurance has been the same since the nfip was introduced in 1968. this methodology was based on “flood insurance rate maps” (companies) to determine the costs of the flood insurance. The problem with this model was that too many properties were poorly rated and premiums were insufficient to cover flood claims, creating massive debt for the NFIP.
To address inaccurate rates and debt, FEMA introduced the 2.0 risk rating. this new methodology no longer uses flood maps. instead, rates are based on the risk of an individual property, such as the type of foundation, the elevation of the house, and the distance to the water. Risk Rating 2.0 is intended to produce the most accurate flood insurance costs, according to FEMA.
how does risk rating 2.0 affect nfip flood insurance costs?
Your flood insurance costs may have gone up or down with Risk Rating 2.0, a new system for setting rates on a per-property basis. These rates went into effect for new policies and policyholders who wanted to take advantage of the new rates in Oct. January 1, 2021. Risk Rating 2.0 rates are effective for all remaining policies that renew on or after April 1, 2022.
many owners saw a modest increase in rates. Here’s a look at how the change affects flood insurance rates in each state.
states with small increases in cost of flood insurance after 2.0 risk rating
read more: here’s who is most affected by new fema flood insurance rates
how nfip flood insurance rates are determined
Risk Rating 2.0 calculates your flood insurance rates based on your property’s flood risk, including:
how to save money on flood insurance
Here are some ways you can lower the cost of your flood insurance:
fema offers discounts to homeowners who take steps like installing flood vents and elevating their machinery and equipment (such as central air conditioning and water heater) above the first floor.
obtain an elevation certificate
If your home has an elevation certificate showing that your first floor is higher than the first floor height determined by FEMA, you may be able to get a lower premium.
choose a higher deductible
fema flood insurance policies have separate deductibles for buildings and contents coverage, ranging from $1,000 to $10,000. if you select higher deductible amounts, you will pay less in premiums. You can save up to 40% by selecting a $10,000 deductible, but keep in mind you’ll have to pay that amount if you file a flood insurance claim.
nfip community discount
community rating system (crs) discounts are based on your community’s efforts to reduce flood risk. ask your insurance agent if your community participates in the crs.
Do I need flood insurance?
Some homeowners may be required to carry flood insurance, including:
Even if you’re not required to have flood insurance, it’s worth considering. That’s because homeowners insurance won’t cover flood-related damage.
how to get fema flood insurance
The NFIP is administered by FEMA and sells federally-backed flood insurance through more than 50 insurance companies through an initiative called NFIP Direct. nfip policies are available in more than 22,000 communities that participate in the program. The program is the leading provider of residential flood insurance in the United States. covers more than 5 million homes and businesses.
To obtain an NFIP policy, contact your home insurance agent. You can also find a flood insurance provider on the fema website.
There is usually a 30-day waiting period to purchase flood insurance before it goes into effect, so it’s a good idea to purchase a policy as soon as possible.
how to get private flood insurance
fema flood insurance is not the only option. You can also purchase flood insurance from a private insurer. It’s a good option for homeowners who don’t live in a participating NFIP community or homeowners who find FEMA’s coverage options insufficient.
Private flood insurance may be available as:
higher costs could result in 1 million fewer Americans with fema flood insurance
Due to higher costs for some homeowners, one million fewer Americans will purchase FEMA flood insurance by the end of the decade, according to a report obtained by the Associated Press under the Freedom of Information Act. The report was originally provided to the US. uu. treasury secretary and some congressional leaders in late 2021.
fema downplayed the report and said the numbers were taken out of context, noting that the agency has not directly studied how many homeowners will buy flood insurance.
“There are numerous reasons why growth could occur over time,” said david maurstad, a senior executive at nfip. Maurstad added that an enrollment analysis must take into account fema’s marketing efforts, clear messages about flood risk, price reductions and other factors.