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Flood insurance is not mandatory for homeowners in New Jersey, but it may be a requirement in order to qualify for a mortgage if you live in an area that is at high risk of flooding. Even if you're not near the coast of New Jersey or a major river like the Delaware, flood insurance may be worth purchasing, as homeowners and renters insurance doesn't cover damage due to floods. Costs from flooding disasters are rarely reimbursed by the government, so you should consider whether you'd be able to afford the cost of repairing your home from a flood.
Am I Required to Purchase Flood Insurance in New Jersey?
While flood insurance is not a legal requirement of homeownership in New Jersey or any other state, lenders must include obtaining flood insurance coverage as a condition of issuing federally backed (FHA) mortgages to properties located in Special Flood Hazard Areas, or SFHAs. If you live in one of these areas and have an FHA mortgage on your home, you'll be required to purchase flood insurance. A Special Hazard Flood Area, also called an AE flood zone, is a place that has a 1% chance of flooding each year or greater. They're also sometimes referred to as 100-year floodplains. While a 1% chance may not seem like much, it means homeowners who live in an SFHA have a nearly 1 in 3 chance to experience a flood over the course of a standard 30-year mortgage. And while homeowners insurance in New Jersey will protect you from lots of unwanted expenses, flood damage is not one of them.
Additionally, while not mandated by law, some mortgage lenders may choose to require you to purchase flood insurance if you live in an area that is at a moderate risk of flooding, such as a 500-year floodplain or near the Jersey Shore. But regardless of whether you are required to purchase flood insurance, you should weigh the decision of whether to carry flood insurance carefully, as even a single inch of water due to a hurricane or flash flood in a home can cost $10,000 in damages or more to repair. And nearly a quarter of floods happen in places that are not flood zones.
Most flood insurance sold in the U.S. is backed by the National Flood Insurance Program (NFIP) and sold through one of many mainstream insurers. Some private companies also offer their own totally independent policies that aren't subject to NFIP regulations, like maximum coverage amounts. However, mortgage companies sometimes stipulate that you purchase an NFIP-backed policy in order to satisfy their flood insurance requirement, so check with your lender before purchasing a private flood insurance policy.
Do I Live in a Flood Hazard Area?
While most flood zones exist near oceans, rivers and other major bodies of water, areas that are or are not susceptible to flooding are separated by distances of feet, not miles. Furthermore, whether you're in an SFHA is not a simple matter of distance from a body of water like the Atlantic Ocean or the Delaware River—your home's elevation and the existence of flood control measures, such as levees, make a much bigger impact on your risk. To see if you live in an area at risk of flooding, use the FEMA flood map search tool. If you do live in a high-risk flood zone, you'll need a valid elevation certificate to prove what elevation your home is it in order to purchase flood insurance.
How Much Does Flood Insurance Cost in NJ?
The average price homeowners pay for flood insurance in New Jersey is $974 per year, though prices vary significantly based on location. Flood insurance premium rates backed by the NFIP in New Jersey are based on a set formula, so the same policy would cost the same amount regardless of which insurance company you purchased it from. The formula is based on what flood zone you live in, combined with how susceptible to flood damage your house is, alongside other criteria.
If you live in a high-risk flood area, your home's particular susceptibility to flooding is determined by the height of your home's lowest floor (including the basement), compared to how high the water is expected to rise in a 100-year flood, which is called the base flood elevation (BFE). For example, if a 100-year flood in your area is expected to reach 10 feet above sea level, and the floor of your basement is 11 feet above sea level, your house is 1 foot above BFE. The lower your lowest floor, the more expensive your flood insurance rates will be.
Other factors that will influence your flood insurance rates include:
- Coverage amount: Maximum coverage from NFIP is $250,000 for your home's structure, and $100,000 for your personal property.
- Deductible amount: Lower deductibles mean higher flood insurance premiums, and vice versa.
- The age of your home: Homes built before FEMA's FIRM flood maps were introduced in their areas are generally less expensive to insure.
- Residential or business property: Businesses are more expensive to insure.
- Whether the property is your primary residence: Secondary residences are much more expensive to insure.
We collected average flood insurance rates for several cities throughout NJ to give an idea of what people in your area spend per year on flood insurance, though even in a given area, rates will vary significantly based on the criteria described above. Among the cities we surveyed, Newark had the highest annual average premium at $2,684, while Tuckerton had the lowest at $725. Newark also had the highest average coverage amount, with a typical property insured for approximately $487,000.
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Flood insurance policies backed by the NFIP are available from most insurance companies in New Jersey, but you'll find the same rates across all companies, so there's no need to shop around among those providers. On the other hand, it's worth looking around at a few private flood insurance providers, as it's possible you'll find a better rate or coverage that fits your needs better. For example, if you own a home near the boardwalk on the Jersey shore, you may not be able to find flood insurance that covers your finished basement.
What Does Flood Insurance in New Jersey Cover?
Flood insurance policies backed by the NFIP covers the actual structure of your home and the contents inside it, up to separate limits. You can choose the level of coverage you'd like to receive to protect your home, up to the set limits of $250,000 for the structural elements of your home, and $100,000 for your other personal property.
For the purposes of flood insurance, structural elements of your home include:
- Exterior walls
- Electrical and plumbing systems
- Heating and cooling systems, unless they are portable
- Detached garage
- Appliances, unless they are portable
Examples of personal property include:
- Portable heating and cooling systems, like window air conditioners
- Portable appliances, like microwaves
However, there are a lot of limitations to what NFIP-backed flood insurance will cover, both in terms of the type of item covered and what the cause of the damage is.
Things not covered by NFIP flood insurance include:
- Any damage not directly caused by flooding or which could have been prevented, such as mold
- Damage caused by earth movement, even if it's as a result of flooding
- Damage to the actual land you live on, such as from erosion
- Damage to cars, currency or anything that is outside, like swimming pools or fences
- Finished basements, and any personal property kept in the basement
Keep these restrictions in mind when you're shopping for flood insurance. If any of these will apply to you, consider purchasing flood insurance from a private company, which may provide coverage without those limitations.