Why Do I Need Flood Insurance, and How Much Does It Cost?
What is a Flood? – Legal Definition
It may seem like an obvious answer, but the National Flood Insurance Program has established a legal definition of a flood as stated:
“A flood is a general and temporary condition where two or more acres of normally dry land, or two or more properties are inundated by water or mud flow.” ~ fema.gov
Flood can be from rain, tsunami, overflow of a swimming pool, water irrigation system breaks and ‘floods’ your house and the street or the neighbors house. These are ALL examples of flood.
Flood risk is not just based on history. It’s also based on a number of other factors such as rainfall, river-flow and tidal-surge data, topography, flood-control measures, and changes due to building and development. New development miles away from you can create flooding in your area.
Flood hazard maps have been created, and are consistently updated, to show the varying degrees of risk for your property, or community, which helps determine the cost of flood insurance. The lower the risk, the lower your flood insurance premiums.
Visit FEMA’s Flood Map Service, then enter a property address in the search field to view its flood zone.
Flood Rates – Preferred vs. Standard
There are only two types of Flood rates; Preferred and Standard. ALL properties are located in a flood zone, it’s just a matter whether the flood zone is considered a ‘high risk’ flood zone, which would be an A or V zone, or a ‘preferred zone’, which is a B, C, or X zone.
Preferred zone (Lower risk)
Zones B, C, or X
Standard zone (Higher risk)
Zones A or V
How do I qualify for Preferred risk flood insurance?
In order to qualify for a Preferred risk flood insurance policy, the building must be located in a moderate risk B, C, or X zones
What is the difference in coverage for Preferred risk and Standard risk flood insurance?
There is no difference in coverage provided for your building. The difference lies in the price you need to pay. Since Preferred risk buildings are in an area less likely to experience a flood loss, property owners pay less money for the same amount of coverage.
How can I tell what type of policy I qualify for?
The easiest way to tell what type of flood insurance policy you qualify for is to contact a licensed insurance agency, such as Culley Insurance Group, that specializes in flood insurance. Flood plain maps change frequently and it’s important to work with an agency who knows your location so you don’t end up purchasing a more expensive type of policy than you really need.
How do I purchase flood insurance?
You cannot buy flood insurance directly from the federal government, you must us an Agent. The flood program is complex, and for the best results you should use an agent with direct knowledge and experience in the National Flood Insurance Program.
Culley Insurance Group specializes in flood coverage. For more information or to get a quote for a property, please contact us.
Condominium owners, what you should know
A lot of people have questions as to why an individual unit owner would need to purchase a separate flood policy for their unit.
Every Condo Association has their own by-laws and CC&R’s, which determine how the condo association runs, and states the responsibilities the association has vs the individual unit owners. Each condo association will specify what they will insure the buildings for, if they will insure the interior of the units to ‘include’ improvements, or if they will only insure to put the unit back to the way it was originally constructed.
That being said, the unit owner must then purchase additional insurance for their improvements and contents, and loss of use. This valuable coverage is purchased under a homeowners policy called an HO6.
An HO6 policy does provide for ‘water damage’ coverage, but does not cover a ‘flood loss’. If a unit is located in an association that is in an A or V flood zone, then depending on what floor the unit is on, they would want to consider purchasing their own flood policy to protect their improvements and contents coverage.
The by-laws should be checked to see what the condo association will provide coverage for in the event of a flood loss, and it’s also a good idea to see if the association is insuring the buildings for 100% replacement cost or 80%. There are still a lot of condo associations that are not insuring the buildings for 100% replacement cost.
Some unit owners that should purchase a flood policy, don’t due to the cost. They figure that FEMA will step in and pay for any losses should they experience a flood loss. Most people don’t realize that FEMA will only step in if the state declares an emergency and there is a Presidential declaration of a major disaster. FEMA will then assist. However, depending on various factors, most owners end up paying high interest on disaster loans.
Flood insurance premiums are calculated based on factors such as:
- Year of building construction
- Building occupancy
- Number of floors
- Number of Units
- The location of its contents
- Its flood risk (i.e. its flood zone)
- The location of the lowest floor in relation to the elevation requirement on the flood map (in newer buildings only)
- The deductible you choose and the amount of building and contents coverage
If you own your unit and it is located in a high-risk flood area, you will be required to purchase flood insurance if your lender is federally regulated or insured.