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If you live near a body of water and finance your home, you are probably required to have flood insurance. But with rising sea levels, even homeowners in moderately risky flood zones should consider getting flood insurance. Finding the right policy is not always straightforward. In this piece we detail how you can get the best flood insurance policy for yourself.
Who Has the Best Flood Insurance?
Most flood insurance policies in the United States are managed by the Federal Emergency Management Administration (FEMA) as part of the National Flood Insurance Program (NFIP), and sold by private insurers.
This means that if you buy an NFIP-backed flood insurance policy, your annual premiums and coverage levels will be the same regardless of the company you buy it from.
The best flood insurance comes down to customer service and coverage limits.
Best flood insurance company based on customer service
This is especially important because of the nature of flood insurance claims. Most claims are filed after major large-scale floods, and insurers only have a finite amount of adjusters. Having an insurer with a strong record for keeping their clients happy and informed can go a long way in reducing the stress of dealing with a flood. Amica, USAA and Encompass score in the top three for their handling of clients and their home claims, which we expect to be the same for their flood claims.
USAA is only available to those who qualify - military members and their direct family. The company is generally rated well across most of their insurance products. Amica and Encompass are open to anyone, but they do not operate in every state. If they are not available, Liberty Mutual is a third best option from the top companies you will likely be able to find in your area.
Best flood insurance for coverage
If you want higher limits than what is available in the standard NFIP-backed policies, private insurance companies are better options for the best flood insurance coverage. NFIP claims are usually capped at $250,000, with only homes in the highest risk categories getting access to higher limits. They also don't cover additional living expenses should you be displaced in a flood. If you live in a lower risk area and want higher limits you will need to go through a private flood insurance company--although there are not many around.
Currently your best bet for private flood insurance is the Flood Insurance Agency. The Flood Insurance Agency is backed by Lloyd's of London, among others, and offers policies in all 50 states. If you live in California and Florida, you have a few more options, including:
Choosing private vs. NFIP flood insurance
Here is a quick summary of the pros and cons to going with a private insurer:
Benefits of Private Flood Insurance
Drawbacks of Private Flood Insurance
|Coverage limits past $250,000 for home and $100,000 for possessions||There's a possibility you may be dropped after a claim|
|Shorter waiting period (14 days vs 30 days)||Higher premium if you go back to NFIP|
|Less worry of insolvency or instability||May not satisfy home loan flood insurance requirements|
Another thing to be aware of is that unlike NFIP policies, private flood insurers are permitted to end your policy if your flood risk becomes too great. Furthermore, if you try to return to NFIPcoverage, you may find your premiums are much higher because of increased flood risk in your area: you would no longer be "grandfathered" into whatever zone your home was initially placed in.
What that means is if your home is now in a more dangerous zone, you would have to pay that zone's current rates rather than your initial rate. Finally, be aware that your home loan provider, especially if it's a federal loan, may not recognize your policy out with a private company.
How do you buy flood insurance?
You can buy flood insurance by speaking with and getting a quote from a flood insurance agent who can write policies from the NFIP. You won't be able to buy flood insurance online as you would car or homeowners insurance. For private flood insurance, the Flood Insurance Agency provides estimated quotes on their website, but you will have to submit a separate application to actually purchase a policy.
Do you need flood insurance?
You should get flood insurance if your home is located in a moderate to high risk area for flooding. To be more specific, you should have flood insurance if you live in a "V" or "A" zone (Special Flood Hazard Areas (SFHA)) which are considered "very high risk" for flooding by FEMA. To find out if you live in a high risk zone, you can search your area's flood map here. To know whether you should get flood insurance you can consult the table below:
Should You Get Flood Insurance?
There's no question that sea levels are rising, and lands that were not susceptible to flooding a decade ago can be susceptible now, and even more so in the future.
Remember also that your standard homeowners insurance policy will not cover any damage caused by a natural flood. If you think there can be any chance your home may be flooded in the next decade, consider that just one inch of flood water can cause $10,000 of damage to a home, the average flood insurance claim is $30,000, and 20% of all claims come from "moderate to low risk" zones. To get more information on what you're covered for with flood insurance, click here.
How much does flood insurance cost?
Flood insurance can cost as little as $400 per year for low-risk homes, and over $13,000 per year for high-risk homes. It all depends how elevated your home is and how far from the coast. To get a rough idea on what some plans may cost, we got some quotes from the Flood Insurance Agency's website for different types of home facing varying risk for $250,000 of building coverage and $100,000 of contents coverage with a $2,000 deductible.
"B" Zone and Lower
*for a policy with a $1,250 deductible
If you are in a "V" zone, it's clear you are going to need to pay a sizable amount of money each year for flood insurance. We would recommend comparing quotes from both private and NFIP-backed flood insurance programs.
The NFIP may be able to get you discounts that aren't available through a private insurer, so they may end up being cheaper. You can also adjust your deductible for a higher amount to reduce your premium. We found that increasing your deductible to $5,000 (from $2,000) saves around $1,000 per year in a "V" zone. Your premium will also fluctuate depending on your home.
The following factors will also impact how much you'll pay for flood insurance
- Your home's age
- Your home's construction materials
- Whether you have a basement
- The number of floors your home has
You can find providers of NFIP-backed flood insurance in your area, and get sample quotes, at Floodsmart.gov.