How To Buy Flood Insurance

05/27/19

Many people wonder whether flood insurance is a necessity. With the threat of climate change and global warming, this coverage is critical. Let me explain how to buy flood insurance and provide you with an overview of why you need it.

I Don’t Have Flood Insurance – Why Do I Need It?

Watch this short, informative video, Why do I Need to Rethink Insurance?

FACT: Floods are the nation’s most common and costly natural disaster and cause millions of dollars in damage every year. Floods cost America, on average, $8.2 billion each year (according to 2015 data). Recovering from just one inch of water inside your building can cost about $27,000. Learn about The BIG Cost of Floods.

FACT: Homeowners and renters insurance do not typically cover flood damage.

FACT: Floods can happen anywhere–More than 20 percent of flood claims come from properties outside the high-risk flood zone.

FACT: Flood insurance can pay regardless of whether there is a Presidential Disaster Declaration.

FACT: Most federal disaster assistance comes in the form of low-interest disaster loans from U.S. Small Business Administration (SBA) and you must pay them back. FEMA offers disaster grants that don’t need to be paid back, but this amount is often much less than what is needed to recover. A claim against your flood insurance policy could and often does, provide more funds for recovery than those you could qualify for from FEMA or the SBA–and you don’t have to pay the money back.

FACT: You may be required to have flood insurance. Congress has mandated federally regulated or insured lenders to require flood insurance on mortgaged properties that are located in areas at high risk of flooding. But even if your property is not in a high-risk flood area, your mortgage lender may still require you to have flood insurance.

How Can I Buy Flood Insurance?

No alt text provided for this image
Flood can happen anywhere, not just in coastal areas.

You can only purchase flood insurance through an insurance agent or an insurer participating in the NFIP. You cannot buy it directly from the National Flood Insurance Program (NFIP). If your insurance agent does not sell flood insurance, you can contact CMR Associates at 877-447-4301 or 212-447-4300 to request independent insurance advice.

What Questions Should I Consider To Determine The Coverage I Need?

  • Does my community participate in the National Flood Insurance Program? Flood insurance from the NFIP is only available in participating communities, but most communities do participate. Your agent can tell you if your state and community participate, or you can look it up online in the Community Status Book.
  • What flood zone do I live in? What is my property’s flood risk? Is there a flood map(see note below) change coming that could affect what I pay?
  • Is flood insurance mandatory for my property? Will the lender require it?
  • Do I qualify for a Preferred Risk Policy?
  • Does my community participate in the National Flood Insurance Program’s Community Rating System (CRS)? If so, does my home qualify for a CRS rating discount?
  • What will and won’t be covered?
  • Will the federal government back my flood insurance policy?
  • How much coverage should I get for my building and for my contents?
  • How can I reduce the cost of my flood insurance?
  • Are there additional expenses or agency fees?
  • Will my policy provide Replacement Cost Value or Actual Cash Value—and what’s the difference between the two?
  • Who should I call if I have a flood claim?

What’s Covered?

Watch this informative video, What do I Need to Know About Flood Insurance Coverage?for information about what is covered by a standard policy.

  • The cause of the flooding matters. Damage caused by a sewer backup is only covered by flood insurance if it’s a direct result of flooding; the damage is not covered if the backup is caused by some other problem. For a complete summary of coverage, go to What’s Covered
  • Coverage for your building and contents. Contents and building coverage are purchased separately (for the Preferred Risk Policy, there’s an option for combination coverage for both contents and building coverage), but there are always separate deductibles. Unless you have contents coverage, your flood-damaged contents are not covered by your NFIP flood insurance policy

It is a good idea to purchase coverage for both your building (the structure) and its contents. 

Covered Building property:

  • The electrical and plumbing systems
  • Furnaces, water heaters, heat pumps, and sump pumps
  • Refrigerators, cooking stoves, and built-in appliances such as dishwashers
  • Permanently installed carpeting over an unfinished floor
  • Permanently installed paneling, wallboard, bookcases, and cabinets. The damage must be directly caused by flood water. Cabinets that were not damaged by flood water are not covered, even if they match cabinets that were damaged by flood water
  • Window blinds
  • Foundation walls, anchorage systems, and staircases attached to the building. There is an exclusion for “loss caused directly by earth movement even if the earth movement is caused by flood”
  • A detached garage used for limited storage or parking. Up to 10 percent of the building coverage limit can be used, but will reduce the total amount of building coverage available
  • Cisterns and the water in them
  • Fuel tanks and the fuel in them, solar energy equipment, and well water tanks and pumps

Covered Personal Property – Contents (if you have this coverage on your policy):

  • Personal contents property
  • Personal belongings such as closing, furniture and electronic equipment
  • Curtains
  • Portable and window air-conditioners
  • Portable microwave ovens and portable dishwashers
  • Carpets that are not included in building coverage
  • Clothing washers and dryers
  • Food freezers and the food in them (but not refrigerators; those are covered under Building coverage)
  • Certain valuable items such as original artwork and furs (up to $2,500)

What Should I Know About Deductibles?

Deductibles differ from policy to policy and apply separately to building and contents coverage (you can ask CMR whether your contents are covered, as building coverage is only for the structure). As with other insurance plans, a higher deductible will lower the premium you pay but will also reduce your claim payment, meaning you will need to cover the difference out of your own pocket. Sometimes a mortgage lender will set a maximum amount for your deductible.

Why Am I Paying This Amount for Flood Insurance?

NFIP flood insurance rates do not differ from company to company or agent to agent. All policy premiums include certain fees and surcharges, so keep this in mind when discussing a price quote. If your community participates in the Community Rating System (CRS), you may qualify for an insurance premium discount. The discount is calculated based on the community’s efforts to reduce the risk of flooding.

Watch this short, informative video, What Factors Determine How Much I Pay for Flood Insurance?

The amount you pay for your policy is calculated based on factors such as:

  • Year of building construction
  • Building occupancy
  • Number of floors
  • Location of its contents
  • Flood risk (e.g., its flood zone)
  • Location of the lowest floor in relation to the Base Flood Elevation on the flood map
  • Deductible and amount of building and contents coverage

The NFIP’s Preferred Risk Policy (PRP) offers lower-cost protection for homes and apartments in areas of low to moderate flood risk. These areas of moderate or minimal flood hazards are shown as B, C, X on a Flood Insurance Rate Map (FIRM). AR, and A99 zones on a FIRM designated area behind a levee currently under construction or repair. Though the risk of flooding is higher in AR and A99 zones, Congress authorizes FEMA to provide the PRP to property owners in these areas in anticipation of the reduced risk of the levee project.

Is There A 30-Day Waiting Period?

Typically, there’s a 30-day waiting period from date of purchase until your policy goes into effect. Here are the exceptions:

  • If the building is newly designated in the high-risk Special Flood Hazard Area (SFHA) and you purchase flood insurance coverage for it within the 13-month period following a map revision, there is a 1-day waiting period.
  • If you purchase flood insurance in connection with making, increasing, extending, or renewing your mortgage loan, there is no waiting period.
  • If you select additional insurance as an option on your insurance policy renewal bill, there is no waiting period.
  • If a property is affected by flooding on burned federal land and the policy is purchased within 60 days of the fire-containment date, there may be no waiting period. Waiving of the waiting period is determined at the time of claim.

Are Some Property Owners Required to Have Flood Insurance?

  • Got a Mortgage? Homes and businesses in high-risk flood areas with mortgages from federally regulated or insured lenders are required to have flood insurance. While flood insurance is not federally required if you live in a moderate- to low-risk flood area, your lender may still require you to have insurance.
  • Received Disaster Assistance? If you live in a high-risk flood zone and you’ve received federal disaster assistance in the form of grants from FEMA or low-interest disaster loans from the U.S. Small Business Administration (SBA) following a Presidential Disaster Declaration, you may be required to maintain flood insurance in order to be considered for any future federal disaster aid.

What Is An Elevation Certificate And Why Might I Need One?

No alt text provided for this image

You may be asked to produce an Elevation Certificate (EC). This certificate verifies your building’s elevation compared to the estimated height floodwaters will reach in a major flood in a high-risk flood area.

It’s also beneficial to ask if your community participates in the Community Rating System (CRS), because this could mean local officials already have a copy of your EC on file. Policyholders with insured properties in communities that participate in CRS may be eligible for policy discounts.

A property owner in a high-risk flood area always has the right to purchase an EC, which may reduce your flood insurance premium.

For questions about how you can explore cost-saving solutions for your flood insurance and/or commercial insurance, or for advice on finding a flood specialist agent, please drop me an email at croche@cmr-associates.com or visit cmr-associates.com.

What Can You Do Today To Reduce Your Flood Insurance Or Commercial Insurance Cost?

CMR & Associates will provide you with a no-cost service by reviewing your current flood insurance coverage to make sure that your coverage is adequate and affordable. If you currently do not have flood coverage, we can assist you in finding the appropriate coverage at an affordable rate. Please email CMR Associates or call 877-447-4301 or 212-447-4300 for more information.

No alt text provided for this image
CMR & Associates can help you choose the right coverage.

About CMR: CMR & Associates provides independent insurance advice by reviewing your current flood insurance and/or commercial insurance to improve coverage and reduce cost. Through our proprietary database – The CMR Database® (comprised of some 13000 brokers nationwide) – we maximize access to the commercial insurance industry for greater options that will translate to better coverage and lower cost. Since 1999, we have saved clients over $120 million.