How much does flood insurance cost?

How much is flood insurance?

U.S. homeowners pay an average of $800 per year for a flood insurance policy from the National Flood Insurance Program (NFIP), but prices might change if you choose to go through a private provider. NFIP coverage limits are capped at $250,000 in dwelling coverage and $100,000 for personal property; if you need higher coverage limits, then a private flood insurance policy may be better suited to your needs.

If you have a mortgage or other type of home loan, your lender will likely require you to buy a flood insurance policy if your home is in a Special Flood Hazard Area (SFHA), Coastal Barrier Resources System (CBRS) or Otherwise Protected Area (OPA). Flood policies are generally required to be paid in full up front, either by you directly or out of your mortgage’s escrow account.

Flood insurance costs will change depending on your state. The table below breaks down how much flood insurance is on a state-by-state basis, with rates gathered from FEMA.

How are flood insurance rates calculated?

Regardless of whether you opt for an NFIP policy or a private one, just like home insurance, there are a couple of different rating factors that can affect flood insurance costs.

Flood risk

The first and perhaps most significant factor that determines the cost of flood insurance is the historical risk of flooding in your region. While every home has a level of flood risk, only those in moderate- to high-risk areas are typically required by a mortgage company to carry flood insurance. However, there are some exceptions to this rule. For instance, Florida homeowners insured with state-backed Citizens must carry flood insurance, regardless of their flood zone.

Even in lower-risk flood zones, flooding is still a possibility. One in three flood insurance claims are in low- to moderate-risk areas, according to FEMA. Since flood insurance costs are largely based on risk, the more likely flooding is in your area, the more your flood insurance is likely to cost. To find how much of a risk flooding is in your area, check out FEMA’s flood maps.

FEMA Risk Rating 2.0

In April 2023, FEMA fully rolled out the Risk Rating 2.0 system. Risk Rating 2.0 is FEMA’s new approach to setting flood insurance prices that more accurately capture flood risk. Under Risk Rating 2.0, FEMA considers new data sets, modern science, third-party software, home value, rebuild costs, flood risk, flood type, flood frequency and other factors that were not previously part of FEMA’s rates-setting methodology.

The goal of the Risk Rating 2.0 system is to have NFIP flood insurance costs increase each year so that the current cost of flood insurance matches the risk-based cost of insurance. However, increases are capped at 18 percent per year. If you choose to purchase a flood insurance policy through the NFIP, you can generally expect your premium to increase upon renewal.

Home age and construction

Older homes built with outdated construction materials and techniques may be more vulnerable to damage caused by flooding and could incur additional expenses —  such as custom lumber milling — to repair. Some modern building techniques may help mitigate flood damage, like including floor openings for water to drain out more quickly.

Type of coverage

There are only two coverage options on an NFIP flood insurance policy: building coverage and contents coverage. Choosing a policy with no contents coverage will likely be cheaper than choosing a policy that includes both coverage types, but this decision could leave you financially vulnerable if a flood destroys your home and everything in it. You may be able to add more coverage types with a private provider, like additional living expenses and scheduled property coverage. These will likely raise the cost of your coverage, though.

Coverage limit and deductible level

Generally, the more coverage you purchase, the more you will pay for a flood insurance policy. Your deductible, which is the amount of money you will pay out of pocket if you file a claim, also impacts your premium. Typically, the higher your deductible, the lower your premium will be. With a higher deductible, you assume a higher amount of financial responsibility in the event of a claim, thus reducing the financial burden of the insurance provider.

Type of policy

Depending on your home’s location, you may qualify for an NFIP Preferred Risk Policy (PRP). PRP policies offer flood coverage for a reduced cost if your home is located in a low-risk flood area. Standard policies are often the only option for homes located in moderate- and high-risk flood areas.

Insurance company

Historically, flood insurance was only offered by the NFIP. Although various insurance companies were able to facilitate the purchase of NFIP policies, the rates were standardized regardless of what company you purchased coverage from. However, within the last several years, private insurance companies have begun to sell and underwrite their own policies. Now, with more companies selling flood insurance, you can get several flood insurance quotes to compare coverage types and premiums, just like you can with homeowners insurance quotes.

What does flood insurance cover?

Many people use the word “flood” to describe any kind of water damage, but floods are distinct weather events and flood insurance is designed to cover a particular set of circumstances.

Flood insurance covers damage caused by weather-related floods, including heavy rainfall, storm surges and overflowing bodies of water. Many homeowners will use the term “flood” when discussing other types of water damage, like broken pipes and water backup. If heavy rains cause a sump pump to fail and water backs up into your basement, that is not a flood. Coverage for damage caused by these instances may be covered on your homeowners insurance, depending on the coverage types and endorsements you have.

According to the NFIP, flood insurance includes the following.

Building coverage

• Plumbing and electrical systems
• Water heaters and furnaces
• Cooking stoves, refrigerators and built-in appliances (like dishwashers)
• Permanently installed carpeting
• Permanently installed bookcases, cabinets and paneling
• Window blinds
• Foundation walls, anchorage systems and staircases
• Detached garages
• Fuel tanks, well water tanks and pumps and solar energy equipment

Contents coverage

• Personal belongings such as furniture, electronic equipment and clothing
• Curtains
• Washer and dryer
• Portable and window air conditioners
• Microwave oven
• Carpets not included in building coverage (such as carpet installed over wood floors)
• Valuable items such as furs and original artwork (up to $2,500)

Keep in mind that these coverage details are from the policies offered by NFIP. A private flood insurance company may have different coverage types, with different coverage options and limits.

Is flood insurance required?

While flood insurance might not be mandated by law, its necessity is often dictated by the location of your home and the terms of your mortgage. Particularly for residences situated in areas prone to moderate to high flood risks, lenders may stipulate flood insurance as a condition of your loan agreement. Scrutinize your mortgage or refinancing documents to confirm compliance with any insurance stipulations.

In specific cases, such as for homeowners insured through Citizens in Florida, flood insurance is a requirement, with the mandate being implemented in stages. The requirement for Citizens policyholders to carry flood insurance hinges on various factors, including the location within Florida and the property's valuation.

How to save money on flood insurance

You can explore several steps to protect your property from flood damage, and these actions could help you pay less for flood insurance each year. Some of these steps could be relatively expensive and entail major home renovations. Getting quotes for the work and asking how much the changes could reduce your flood insurance premium might help you decide if you will save enough to justify the cost of taking these measures. But keep in mind that these steps don’t just serve to reduce your flood insurance premium — they could save you from the heartache, stress and emotional fallout from flood damage.

• Elevate your utilities: Placing your electrical panels, heating and cooling systems, water heaters and other utilities on a platform above the base flood elevation of your home can help prevent flood damage and potentially lower your premium.
• Elevate your property: While it’s not a simple undertaking, obtaining an elevation certificate could drastically reduce your premium.
• Maintain or install flood openings: Flood openings allow water to drain out of your home, potentially reducing the amount of damage that could happen.
• Fill in your basement: Being below ground level, basements are at high risk for severe flood damage. If you are a new homebuyer and looking at homes in flood plains, purchasing one without a basement might be a prudent financial choice.
• Increase your deductible: Just like with homeowners insurance, a higher deductible generally leads to lower premiums because you agree to cover more of the costs of repairs in the event of a claim.

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