Factors Impacting the Average Cost of Flood Insurance in 2020

How much is the cost of flood insurance? Flooded home

While the average cost of a flood insurance policy as part of the National Flood Insurance Program is around $700 annually across the U.S., this number can vary based on your state and your property’s flood risk.

In New Jersey, the average cost is closer to $1,000 per year.

In some cases, to qualify for a mortgage, flood insurance might even be a requirement if your home is in a flood plain.

That said, it can be worth it in the long run, as flood damages and repairs can get expensive.

For example, following Hurricane Katrina, covered homeowners received a total of 167,000 paid losses, at an average of $97,500 per loss.

These payouts were separate from what homeowners received on their standard insurance policies and provided funds to cover damage and losses.

Everyone who owns a home in New Jersey, whether you are in an area prone to flooding or not, should have some level of flood insurance.

Keep reading now to learn about the cost of flood insurance and find out how it can protect you.

What Is Flood Insurance?

Flood insurance is an insurance policy that home or business owners take out to protect property from water damage.

Flood insurance policies may cover buildings, personal property, or both.

Building coverage pays for damage to the physical structures of a home or property.

Examples include:

  • Walls, floors, and ceilings
  • Electrical wiring
  • Foundations
  • HVAC systems
  • Plumbing
  • Appliances

Personal property includes items such as:

  • Furniture
  • Clothing
  • Valuables
  • Food
  • Artwork

It is important to check policies when purchasing to be clear on exactly what they cover.

Failing to do so can lead to nasty surprises should a flood-hit.

Why You Need It

Many home and business owners mistakenly believe that they do not need flood insurance.

Nothing could be further from the truth.

Here are a few reasons why:

Floods Are More Common Than You Think

Of all possible natural disasters, floods are the most common.

Property owners in the United States have a 26 percent chance of enduring a flood during the time in which they own their property.

That’s more than six times the likelihood of experiencing a fire!

As many as one-quarter of all flood insurance claims come from property owners in “low risk” areas.

Floods can result from serious storms, spring thaws after snow-heavy winters, or changes to the landscape that disrupt previous drainage and water flow patterns.

Floods also often accompany other types of disasters, such as hurricanes.

In such incidences, homeowners’ policies often only cover damage caused by other aspects of the disaster while excluding flood damage.

Floods Are Expensive

On average, floods do more than $7 billion of damage to U.S. properties every decade.

Just a single inch of flooding can cost property owners as much as $20,000.

Flood Damage Is Not Covered by Standard Insurance

Law requires most home and business owners to hold a basic insurance policy on their properties.

Policyholders often assume that these policies protect them from all eventualities.

Unfortunately, this is not the case.

Most standard insurance policies do not cover flooding and associated water damage.

In fact, less than 10 percent of homeowners’ insurance policies include flood coverage.

What About Public Assistance?

Some property owners in low-risk areas assume that only a national disaster would cause them to suffer flood damage.

They further assume that in such an event, federal disaster assistance funds will compensate for their losses.

Unfortunately, this isn’t true.

In reality, disaster assistance comes in two forms.

First, it may come as a small grant.

While this is essentially “free money” it is almost always far below the actual damage suffered.

It is not nearly enough to repair or replace everything that was ruined or lost.

Alternatively, disaster assistance funds may come in the form of low-interest loans.

While this may provide an avenue to get the full amount needed, borrowers must pay back the full amount with interest.

This can be expensive and is almost always more expensive than purchasing flood insurance beforehand.

Factors That Affect the Cost of Flood Insurance

Flood insurance rates vary.

Flood insurance cost is typically determined by several factors.

These include:

  • Your property’s location
  • The size and design of your home or professional building
  • The types and levels of coverage you select

Location

Perhaps the most significant factor in flood insurance cost is a property’s assessed risk of flooding.

A property’s risk level is most commonly determined by looking at a¬†Federal Emergency Management Agency (FEMA)¬†Flood Zones map.

These maps combine topographical data with historical records to assess the likelihood that an area will flood.

The height of your property and how close it is to a body of water also plays a role.

Property Size and Design

The layout of your property will impact how much damage you are likely to suffer in the event of a flood.

This may slightly affect the cost of your insurance policy.

Type and Extent of Coverage

As with all insurance, flood insurance policies come in varying degrees of coverage.

More extensive coverage will cost more upfront than a minimum coverage policy.

Most insurance providers offer a flood insurance cost calculator to assist you in estimating the extent of coverage you need.

The Average Cost of Flood Insurance

So how much is flood insurance?

On average, flood insurance costs homeowners between $700 and $950 annually.

The average cost in New Jersey is $954 per year. Taxes and surcharges may also apply.

You may be able to reduce your policy costs by choosing a high-deductible plan.

Under a high-deductible plan, coverage does not kick in until your flood losses hit a minimum amount such as $1,000 or $2,000.

Insurance vs. Damage

How much does flood insurance cost compared to the benefits it provides?

On average, policyholders’ flood insurance claims are around $43,000 each.

This means that for less $1,000 per year, you can get more than $40,000 in protection against disaster!

You get the peace of mind of knowing that should you experience a flood you will have access to the resources and support you need to rebuild your home, business, and life.

Buying Flood Insurance

If you own property, don’t wait to look for flood insurance.

Many flood insurance policies have a thirty-day waiting period before they go into effect.

Delays in purchasing can leave you unprotected when disaster strikes.

Contact our team today and let them help you determine the coverage and cost of flood insurance your property needs.