Flood insurance is mandatory for homeowners in a high-risk flood zone through the National Flood Insurance Program (NFIP) or private insurers. It’s not required for those with government-backed mortgages or who live in a low or moderate-risk area, but it’s highly recommended.
Your home’s location determines your rates. FEMA uses a new rating strategy called Risk Rating 2.0 that assigns rates individually rather than in broad groups.
Flood insurance cost in California depend on how far your home is from a river or ocean, what type of foundation it has, and whether you live in a flood zone. However, even those not in a flood zone should consider purchasing flood insurance. Flood damage is typically not covered by homeowners’ or renters’ insurance, and an inch of water can cost $25,000 in repairs.
The best way to determine if your home is in a flood zone is to check your county’s FEMA online map service center. If your home is in zones AE or VE, considered high-risk areas that comprise the SFHA, you will need flood insurance and may be required by a federally-backed mortgage to do so. According to FEMA, the average cost of flood insurance for properties in these zones is $934 per year.
If you’re in a high-risk flood zone but want to avoid paying for NFIP flood insurance, you can always seek out private flood insurance companies, which offer lower prices than the NFIP. Often, these private insurers can also provide more coverage than the NFIP. If you have an NFIP policy, you can still purchase private flood insurance, but there is a 30-day waiting period for the new policy to go into effect.
Many people think homeowner’s insurance covers flood damage. However, standard homeowner’s policies exclude flood damage and require a separate policy to be purchased from the National Flood Insurance Program (NFIP) or a private insurer.
NFIP rates are based on FEMA’s official maps that denote Special Flood Hazard Areas, or SFHAs. The agency recently updated its pricing system, introducing Risk Rating 2.0. Unlike the old system, which relied on simple metrics like elevation and location within an SFHA to set rates, Risk Rating 2.0 considers distance from water and much more.
It also factors in the likelihood of flooding caused by climate change. The new system has led to dramatic increases in premiums for some California homeowners, causing some to drop their policies altogether. For example, only 2% of homeowners in hard-hit San Francisco have an NFIP policy. The figure is even lower in other coastal communities like Half Moon Bay and Capitola.
Only 193,000 homes in the state are covered by an NFIP policy. Many are in high-risk zones, which can cost more than $820 a year to insure.
But only some residents know they need a separate policy. That’s because most local insurance agents stick homeowners with NFIP policies, which are easy to sell but expensive for their clients. A flood specialist, such as a Flood Nerd, can shop your rate and coverage with a number of different providers. They can sometimes get you a great deal with Lloyd’s of London, the world’s largest flood insurer.
NFIP Preferred Risk Policy (PRP)
The NFIP Preferred Risk Policy (PRP) is a lower-cost policy available to homes with eligible flood loss histories in B, C, and X zones. It offers a fixed combination of building and content coverage limits and content-only coverage. It requires a higher deductible than standard NFIP policies, but the premium is significantly less.
It’s important to note that NFIP and private flood insurance have limitations on what they cover, as the federally regulated NFIP only covers damage caused by flooding from inland and tidal waters. That means that flooding from overflow of rivers or dams is not covered, nor are items stored in basements. In addition, homeowners insurance typically doesn’t cover flood damage, and government disaster assistance is often only a loan that must be paid back.
With all the rain in recent years, flooding is a big concern for many people living in California. While a flood policy is a small investment to protect against a potential catastrophe, it can save a homeowner thousands of dollars in repair and replacement costs.
If you live in an AE or VE zone or have a federally-backed mortgage, the NFIP requires you to purchase flood insurance. However, some mortgage lenders may require you to get a flood insurance policy even if you are not in an SFHA.
In addition to the location of your home, the deductible you choose can also impact how much you pay for flood insurance. The higher your deductible, the lower your premium. However, be sure you can afford to pay the deductible if you need to file a claim.
In some cases, a mortgage lender may require you to have NFIP flood insurance. Even if you are not required to buy it, it is a good idea for everyone because flooding is the most common and expensive natural disaster in the United States, costing homeowners, insurers and the government billions yearly.
The price of your NFIP flood policy depends on your location and the risk of flooding. You can check your risk level and the average cost of a flood insurance policy in California by visiting the National Flood Insurance Program’s website.
You can also find out your community’s current risk level by looking at the National Flood Insurance Program’s most recent FIRM (Flood Insurance Rate Map). FIRMs show what flood zones your property is in and provide information such as base flood elevations (BFE) or depths, the amount of coverage you need and how your house is built.
In the future, FEMA plans to replace FIRMs with Risk Rating 2.0, which will consider individual property data, catastrophe models and actuarial science to produce more accurate flood risk ratings than ever before. You can also avoid high-cost flood zone locations by buying a home not in a flood zone or by getting a survey done for about $1,500.