There’s a saying: where it can rain, it can flood. So for homebuyers, the question shouldn’t be, “can my house flood?” Rather, you should be asking, “what is the flood risk?”
Naturally, flood risk is heightened if you get a house along the coast or near a large body of water (rivers and lakes), but even if your dream house is not a beachfront property, it could be in a high-risk flood zone.
Knowing how prone your house is to flooding is important because it could mean higher insurance costs, assessments and more unexpected repairs when a storm comes through.
Here is what you need to know about flood zones before purchasing a home.
What is a Flood Zone?
All areas are prone to flooding, but some are at higher risk than others. Depending on the level of threat your property is exposed to—low-,moderate-or high-risk—you can face higher insurance premiums as well as potential damage to the home.
Homebuyers can check the Federal Emergency Management Agency (FEMA) website for the flood maps in their neighborhoods. The maps offer a risk calculation based on past events and flood patterns.
According to FEMA, there’s no such thing as a “no-risk zone,” but buyers can see how prone their property is to flooding using the flood maps. Areas with a 1% chance or higher of flooding are considered high risk. This 1% chance flood is also known as the base flood or 100-year flood. During the span of a 30-year mortgage, these areas have at least a one-in-four chance of flooding.
FEMA has designated two main types of flood areas: Special Flood Hazard Areas (SFHAs) and Non-Special Flood Hazard Area (NSFHA).
Special Flood Hazard Areas (SFHAs):
- These zones start with the letters A or V
- They have a least a one-in-four chance of flooding during a 30-year mortgage
- The National Flood Insurance Program’s (NFIP’s) floodplain management regulations must be enforced in these areas
- Property in SFHAs must have flood insurance
Non-Special Flood Hazard Area (NSFHA):
- These zones include B, C, X Pre- and Post-FIRM
- They’re considered low- to moderate-risk flood zones
- They’re not in immediate danger from flooding caused by overflowing bodies of water or hard rains
- According to FEMA, despite their low- to moderate-risk, one in four flood claims occur in these areas
Some Properties Must Have Flood Insurance
If you’re using a government-backed mortgage (this includes Federal Housing Administration (FHA), Veterans Affairs and United States Department of Agriculture (USDA) loans) for a property in a high-risk flood zone then you will be required to get flood insurance.
For buyers who purchase property outside of high-risk zones, lenders might still require flood insurance in order to secure a mortgage, even though it’s not federally mandated.
Two Types of Flood Insurance Available
First, it’s important to note that standard homeowners insurance and renters insurance polices do not cover flooding. You’ll have to get a separate flood insurance policy.
There are two basic types of flood insurance you can get: the government-backed option which is called the National Flood Insurance Program (NFIP) or private flood insurance.
National Flood Insurance Program (NFIP)
Consumers can get the NFIP flood insurance if their community participates in the program. Currently, the NFIP is available in 23,000 communities.
- The advantage of the NFIP insurance is that it’s backed by the government
- Meets minimum requirements for government-backed mortgages
- For people with expensive real estate or high-dollar personal belongings, the disadvantage of the NFIP insurance is that the maximum coverage might be too low.
- The NFIP will pay up to $250,000 for damage to your home and an additional $100,000 maximum for items inside the home, such as clothing, furniture and electronics, freezers (and the food within them) and other valuables.
- There’s no coverage for alternative living arrangements.
Private Flood Insurance
Private flood insurance is available for people who don’t live in participating NFIP communities or want more insurance coverage. The disadvantage of private flood insurance is that the insurance company can cancel your policy.
- Policy holders can get insurance up to 100% of property value and personal belongings inside the home
- Alternative living expenses coverage is available, depending on policy and insurance company
- Policy can be canceled
Is Flood Insurance Worth It?
Even if you’re not required to have flood insurance, it’s worth considering the risks before you decide to go without it.
Some 30% of all flood insurance claims come from households in low- to moderate-risk areas. Additionally, just one inch of water can cause extensive damage to your property, according to FEMA.
Depending on where you live and what your policy covers, flood insurance can start at $80 per month on average. There might also be additional insurance assessments per year depending on if you’re in an area prone to flooding and water damage.
Like most insurance plans, if you opt for a higher deductible you’ll pay less for the insurance. However, if you file a claim you’ll have to cover the differences in damage out of pocket.
Article By: Natalie Campisi
Source: Forbes Advisor