Why are my flood insurance premiums so high?

Flood premiums can be extremely high in certain areas and if you are not working with the right insurance agent. You will hear most insurance agencies say flood insurance is the same no matter where you get it. While most people believe this, it simply isn’t the truth.

First of all in order to understand why your flood insurance premiums are so high you have to understand the standard special hazard flood zones. You have three basic special hazard flood zones, the V zone which is the coastal area, the AE zone which is a 100 year flood zone, and the A zone which is a 500 year flood plain. The V zone is generally going to be the highest priced zone because it is usually within a mile of the water and has the highest probability of being flooded. The other two zones are based on probability, in AE 1 out of every 100 scenarios in a given year an area will flood and A zone 1 in every 500 scenarios in a given year.

 

 

Flood Insurance

 

 

Now that you understand the basic flood zones you can understand that premiums fall into three tiers. V being the highest, then AE, and then A. This should help understand why your premiums are so high. However your premiums do not have to be high. As we mentioned before not all flood insurance is the same.

You have two basic options when purchasing flood insurance. You can purchase it through the National Flood Insurance Program which is what most people do or you can purchase it through the private market. Depending on if there is a mortgage on the property and type of loan it is private flood is almost always the better option. The reason is the flood insurance policy is being issued by a private flood insurance company and they are promising to pay out if there is a loss. The National Flood Insurance program also known as NFIP has many more regulations. They usually require photos of the property and an elevation certificate which can cost up to $500. The average difference in premium between these two types of policies can be anywhere from $1500-$2500 a year. This is why we recommend contacting an independent insurance agency like Community First Insurance Agency in Birmingham, AL (205) 451-4294. The owner holds a master’s degree in hazard mitigation and works with customers on a daily basis helping them understand the flood insurance options out there. So if your home has just recently been put into a floodplain or you are purchasing a home in a floodplain ¬†hopefully now you know what your options are.