Many lenders require borrowers to carry flood insurance if they are in a high-risk zone. Costs vary widely. The NFIP uses several factors, including flood zone designation and the age and condition of your home, to determine costs.
Most NFIP policies will increase yearly until they reach risk-based rates. Some homeowners may qualify for subsidized rates.
Costs
The primary cost associated with flood insurance in Michigan is the annual premium, which is paid in exchange for coverage if you need to make a claim. This premium will vary based on the location and risk of your property and whether you choose building or content coverage. It will also vary depending on the type of policy, your preferred deductible and how much coverage you need.
In addition, there are the costs of preparing and elevating your home to reduce future damage. The NFIP website has an online tool that lets you see how much it might cost and the potential loss of items in varying water levels.
If your property is located in a high-risk area, you are required by federal law to buy flood insurance. If you have a government-backed mortgage, your lender may also require that you carry flood insurance.
In 2021, FEMA implemented a new system for assessing risk called Risk Rating 2.0, which raises NFIP policy rates. Your rate will be impacted if you live in a high-risk zone but not if you live in a moderate- or low-risk area. You can purchase Preferred Risk Policies through the NFIP, which offers building and contents coverage at a lower price for properties in middle- to low-risk zones.
Coverage
Depending on where you live and whether your home is in an area prone to flooding, flood insurance can provide building and contents coverage. The maximum range available is $250,000 for buildings and $100,000 for personal belongings. The policy also covers relocation expenses if you are forced to leave your home.
Generally, mortgage lenders require homeowners in high-risk areas to have a flood policy. If your community participates in the National Flood Insurance Program (NFIP), you can get a subsidy to lower costs. You may also need an NFIP policy to qualify for federal flood disaster assistance grants or loans.
Flood insurance is available to everyone, including renters and condominium unit owners, but premiums will vary by the flood risk associated with your property. The NFIP offers Preferred Risk Policies that provide building and contents coverage for a single price to property owners in low to moderate-risk areas.
Your home’s location should be the main determining factor in deciding whether flood insurance is worth it. Although you can purchase a policy in places with low risk of flooding, a flood can occur anywhere, and it’s important to know how much your home is worth and the costs of rebuilding. The average NFIP claim payout for flood damage is $52,000, so it can be worth the investment.
Deductibles
The deductibles associated with flood insurance coverage differ from those of your homeowner’s insurance. You can choose how much you want to pay for the building and the contents deductible. Your premium will be lower if you have a higher deductible.
The cost of your NFIP policy will be affected by your home’s location, size, and construction. Preferred Risk Policies, which offer both contents and building coverage at one price for properties in low- to moderate-risk areas, can save you money.
NFIP flood coverage covers most damage from heavy rains and storm surges. It also covers damages caused by blocked storm drainage systems, levee failures, and melting snow. Your agent can assist you in determining the amount of coverage you require to protect your home from a possible flood.
Ensuring you have sufficient building and contents insurance coverage to rebuild your house and replace your possessions is crucial. Independent insurance agents can help you determine the value of your possessions and how best to protect them. Online tools such as the NFIP Flood Insurance Rate Calculator and Risk Factor Tool can help you estimate coverage costs.
Exclusions
If your house is in an area with a history of flooding, or you live in a flood zone, most mortgage lenders will require you to get federally backed flood insurance. This policy is separate from your homeowners’ or renters’ coverage and may have its own deductibles and coverage limits.
The government’s National Flood Insurance Program, known as the NFIP, offers basic policies with up to $250,000 in building coverage and $100,000 in contents coverage. The NFIP’s minimum deductible is $500. The average NFIP policy costs about $927 per year.
Private insurers offer supplemental flood policies to help fill gaps in the NFIP’s minimum coverage and add extra features like temporary living expenses, contents replacement value (the amount it would cost to replace your belongings), and mold coverage. They also tend to have lower deductibles than the NFIP.
Most flood insurance excludes moisture damage, such as mildew and mold, unless it results from a covered flood event. It also doesn’t cover any sewage backup or water damage that originates inside your home. You can find more information about flood insurance, including its limitations and exclusions, on the NFIP’s website.