When we bought our house, the lender said we weren’t in a flood zone so we didn’t need to buy flood insurance on top of our homeowner’s insurance. I figured if the bank isn’t worried about it, then I shouldn’t be either. Apparently this might not be the best idea.
Virtually every home is in a flood zone
Unless you live on the top of a mountain, just about any area is susceptible to flooding. Heavy rains can make instant rivers where there wasn’t even a trickle before. All it takes is for a big storm to come after the ground is already saturated. Or you could simply ask some of the people who experienced Hurricane Katrina. Dams and levees fail. Just a few inches of water can cost tens of thousands of dollars worth of damage. In fact, 25% of flood claims come from low and moderate risk areas (areas not required to have insurance by lenders). Check out your local flood map here.
Where do I buy flood insurance?
Flood damage is not covered under homeowner insurance policies. You must buy it separately through the National Flood Insurance Program (NFIP), which is run and backed by the US government. However, nearly everyone is eligible to buy flood insurance regardless of risk level (although the premiums will vary).
The policies are available through private insurance companies and agents. You can find agents here for a free quote. Some insurance companies hint that they can offer discounted quotes, but this is not true. The price should be the same no matter who you go through. I actually tested this by asking 5 different agents both local and nationwide for quotes, and they were all exactly the same once adjusted for the same coverage and deductible. Therefore, I would simply get a quote from the same insurer I have for homeowner’s insurance.
How Much Will It Cost?
Chances are if your lender didn’t make you buy it for your mortgage, then your premiums won’t be too bad. You can estimate your flood risk and premium here. Remember, you have a few choices: Your building coverage amount (up to $250,000), your contents coverage amount (up to $100,000), and the deductibles for each (from $500 to $50,000). If you are in a moderate-to-low risk area, you might get coverage for $200-$500 per year.
With a few exceptions, there is a 30-day wait before the policy takes effect, so don’t be thinking you can just buy it at the last minute. Even if you aren’t a homeowner, flood insurance is available to renters who want to cover their contents.
So, it would seem that almost all homeowners should at least consider getting flood insurance even they are not required to. It can’t hurt to get a quote and research your flood exposure.
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What if you live in an apartment or condominium complex? Unless you live on the lower floors, would you want to get flood insurance? The building itself should be separately insured.
I disagree for those outside of the 500 year flood zone – which means there is a 1 in 500 (i.e., 0.2%) chance they will have a flood that will impact their property. http://msc.fema.gov for maps. Certainly no need for people on upper levels of buildings.
BTW, NFIP policies are limited in the scope of cover – e.g., they do not cover contents at replacement cost value, no loss of use. See http://www.fema.gov/pdf/nfip/summary_cov.pdf
How about these often uninsured property exposures:
– Sewer backup/sump pump breakdown – often offered as an extension on your existing HO policy.
– Earthquake (yes, even outside of CA)
Thought I would add, because most people don’t know how to read flood maps, Flood Zone X (not Shaded X) is OUTSIDE OF the 500 year flood zone. This means that you have LESS THAN a 0.2% chance of a flood impacting you.
Thanks for the mention Jonathan. I’m glad you looked into it. I was surprised by some of the information I learned, like the fact that it’s way more likely you’ll have flood than fire damage over the course of a 30 year mortgage.
I had real trouble renewing my UK home insurance as I live between a river and canal. A lot of companies completely refused to insure me and some were really expensive. After a lot of hunting around I found one who very fairly said that because the land had never flooded since the houses were built then they accessed it as low risk as these days there is no way of predicting who will and will not flood.
I’d checked the FEMA maps a few times before I bought the house.
If the house isn’t in a 100/200 year flood zone, you probably don’t need it. Of course, you can always buy it if you have $ to waste.
I think Aaron makes a good point. Not all homeowners own a single-family house.
Now for fun, try to get earthquake insurance. (IIRC, you live in Western WA/OR too, so it is something to consider.)
After spending $15K or so to bolt the walls to the foundation (it was ok, I was gutting the basement anyway), I was able to find a CA insurer. The earthquake insurance costs as much as my regular homeowners insurance.
I think of the NFIP as a fix-it discount program. During college, I worked for an insurance adjuster and the NFIP, while mostly the only choice when you live in a flood area, would never cover the homeowner 100% for any damage. Some strange provisions didn’t allow you to collect if your basement flooded (not covered for some reason in a lot of cases) and then when you were covered it was at most for 80% of the damage, minus anything they could think of. Of course, this is a federally subsidized program and they cover places that other insurance companies just wouldn’t. But I wouldn’t feel overly secure with them either.
Most folks don’t realize that a frequent cause of flooding is “backflow”. Homes are often flooded when a backflow of sewage occurs. Most policies won’t cover backflow damage, I made certain that mine does.
Install a backflow preventer (under $200 installed, free in many cities like mine).
http://www.sewersmart.org
Ps. A whole house surge suppressor ($100) is cheap insurance too.
I just checked and we are in the 500 year flood plane which is not all that unexpected. our basement (first floor) is 182 ft above sea level, a good 80 feet above the river across the street and the two towns across the river have a hig point of 50 feet above sea level so something major would need to happen to affect us… interesting looking at the map though.
Upper-level condos are probably okay, but lots of people have townhouses which I am not sure if the HOA covers flood.
Sewer-backup – For us, if it is not covered by flood, I think it is an add-on to Homeowner’s insurance. If it is sewer backup caused by flood, then the NFIP covers it.
KMC – I would just point out that the 26% chance in 30 years number (making it more likely than fire) is only if you are in a 100-year floodplain. Your post seems to suggest that it’s for all houses everywhere. From Floodsmart.gov: “Areas with a 1% annual chance of flooding and a 26% chance of flooding over the life of a 30-year mortgage.”
I agree that floods in low-risk zones are unlikely, but that’s why you can get coverage starting at $100/year.
There is an important difference between unlikely and impossible. Look at all the crazy things HO insurance covers. If it was truly impossible, then you would think HO insurance would cover it in certain zones? I would look at it as a way to complete your homeowner’s insurance.
I live near two rivers and a lake, but my home is about 700 feet above sea level, if my home were be flooded then my home town would be under water completely.
Nice article, Jonathan. Do you are anyone else have some additional info about typical deductibles or other caveats about flood insurance?
Even if you have flood insurance, in the event of catastrophic magnitude, you may still find that insurance company use all kinds of fine print to disqualify you from making claims.
Also, please don’t rely on the map too much. Some flood plain maps haven’t been updated for at least 20-30 years. There are much politics going on to not having the map updated (developers and real estate investors hate to see their waterfront development all of sudden look unsafe).
I still don’t think I would purchase a policy if I remain here in Ohio and live far from rivers,lakes, etc.. I know it would be a risky move in case one ever did come but to me I just don’t see it happening to the extent that it would damage my entire home. I do worry about “backflow” as the other person posted about. These days you can get insurance or protection on just about anything whether it is new computer or your home. This is one decision I would make out of the numerous choices I have when owning something.
On the plus side, we’re on the top floor of an apartment building on a hill. On the minus side, we’re on the top floor so rain can probably get in more easily. I don’t know if our policy covers rain, but I know the building is responsible for keeping the roof repaired. So far so good.
What do you do if your structure is valued at over 250K?
I live in NH and we recently had two (yes, two) 100-year floods hit the same area. It was absolutely devastating. I would check your location for creeks/streams and where you are relative to the closest dam. Definitely worth investigation!!
Hey Jonathon,
It seems to me you might be better off looking at earthquake insurance. You live in the greater Portland area, right? I live up in Seattle and I think both areas have a greater likelihood of experiencing a major earthquake than they do being hit by a flood. (just my opinion)
We have earthquake insurance on our house that has a 15% deductible. It’s basically just to cover us if the really big one hits.
After Hurricane Katrina I volunteered to work for FEMA for a month. (I work for another federal agency). After speaking to the Hazzard mitigation people one day I called for flood insurance. I live in a co-op on the second floor and will not be flooded out in the traditional sense. I got flood because if there is a lot of rain ect. and it saturates the ground to where the buildings foundations shifts guess what, that’s a flood with no river in site. This happened a few years ago to a lot of people in Pittsburg PA who were not near any lake or river.
Jane,
Did someone specifically tell you that that scenario would be covered by NFIP? After reading a few sections of a NFIP policy, I am not certain that it would. I just don’t want you to waste your money thinking you are getting something you are not.
Jane,
Joe is right. I work for an insurance company and have written many flood policies for clients. If the flood is caused by rain water that pools and floods because it has no where else to go, this is NOT considered a flood. Floods are classified as a body of water over-flowing its natural banks; in addition, two adjacent properties must be flood in the senario and one of these “properties” can be a road. If rain causes a body of water to over flow that is one thing but rain water that just pools on your property and saturates a foundation is another. Please contact your local insurance agent to get details before spending any money.
After speaking to the Hazzard mitigation people one day I called for flood insurance. I live in a co-op on the second floor and will not be flooded out in the traditional sense.Please contact your local insurance agent to get details before spending any money.
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mary scott
jonathan
Can you share the insurance companies info on the quotes you recevied and who did you go with? Also if the home is NOT your primary residence thenare the rates different? What about commercial properties?