Flood insurance is one of the most misunderstood tools for protecting property and financial stability in flood-prone areas. Yet when it comes to flood insurance cost, many property owners are unsure what factors actually influence their premiums, or why rates can vary so widely from one location to another.
Additionally, many property owners are surprised to learn that flood insurance is not automatically included in their overall property insurance coverage. In fact:
- About 92% of U.S. properties at risk of flooding (i.e. with at least a 1% annual chance of flooding) were not covered by an active NFIP (National Flood Insurance Program) policy as of May 2023.
- Approximately 77% of single-family homes outside FEMA high-risk flood zones are estimated to have no flood insurance despite being at risk.
Whether you manage a commercial property or own a small business, understanding how flood insurance costs are determined can help you make informed decisions and avoid surprises.
Below, we break down the main factors insurance companies use to calculate the flood insurance cost for your specific property and what you can do to potentially lower what you pay on your premium.
1. Location and Flood Zone Classification
The most significant factor influencing flood insurance cost is location. Properties are categorized into flood zones by the Federal Emergency Management Agency (FEMA) through Flood Insurance Rate Maps (FIRMs).
- High-risk zones (A and V zones) generally face higher premiums because they have a greater chance of flooding in any given year.
- Moderate- to low-risk zones (B, C, and X zones) typically have lower rates, though flooding can still occur in these areas.
If your business is located in or near a high-risk floodplain, you’ll likely see higher premiums, but proper mitigation measures can sometimes help offset these costs.
2. Building Elevation and Base Flood Elevation (BFE)
Insurance providers assess how high your property sits compared to the Base Flood Elevation (BFE) - the estimated level floodwaters are expected to reach during a 1% annual chance flood (often called the “100-year flood”).
The higher your structure is above the BFE, the lower your risk, and therefore, the lower your insurance premium. Conversely, if your property is below that level, your flood insurance cost will rise.
An Elevation Certificate can provide official documentation of your building’s elevation relative to the BFE - a valuable step in ensuring accurate rates.
3. Type of Building and Construction Materials
The structure and materials used in your building also play a key role. Factors include:
- Foundation type (e.g., slab-on-grade, crawlspace, or elevated)
- Building materials (resistant materials like concrete or metal fare better)
- Number of floors and whether there’s a basement
Buildings constructed with flood-resistant materials and designs often qualify for lower premiums.
4. Coverage Amount and Deductible
Like other forms of insurance, your coverage limits and deductible directly impact your premium. Higher coverage and lower deductibles increase your flood insurance cost, while higher deductibles can lower them - though that means paying more out of pocket if a flood occurs. It’s important to strike a balance that adequately protects your property without overpaying.
5. Flood Mitigation and Protection Measures
Installing flood mitigation systems, such as custom flood panels, flood doors, or sump pumps, can significantly reduce your flood risk and potentially lower your insurance premiums.
Insurance companies often take into account proactive steps like:
- Elevating utilities and electrical systems
- Installing engineered flood barriers
- Implementing a flood emergency plan
These measures show insurers that your property is better prepared to withstand flooding, which can translate into savings.
6. Claims History
Your property’s flood claim history can also affect insurance costs. Multiple past claims can increase your premiums, as insurers view them as an indicator of higher future risk.
If your property has a history of flooding, investing in flood protection upgrades can demonstrate reduced risk and help manage long-term costs.
7. Community Rating System (CRS) Participation
If your community participates in FEMA’s Community Rating System, you may be eligible for discounted premiums. The CRS rewards municipalities that take steps to reduce flood risk, like improving drainage systems, enforcing strong building codes, and maintaining floodplains. These community-wide efforts can reduce your flood insurance cost by up to 45% in high-risk areas. That’s a significant amount of savings!
What it Means to Really Protect Your Property Against Floods
Flood protection is not just about buying a generic barrier, putting it up, and calling it a day. It’s a multi-layered approach that starts with:
- Knowing your risk
- Understanding your flood insurance cost
- Participating in any programs that may help lower premiums
- Getting a professional flood risk assessment for your specific property
FEMA flood maps can be outdated or misleading, especially as climate change increases flood risk worldwide, so it’s important not to rely heavily on them to determine your flood risk.
From there, the right custom flood barriers tailored to your property, combined with adequate flood insurance coverage, provide comprehensive protection. Taking these proactive steps can make a significant difference, whether you’re safeguarding a commercial property or your home.
Flood protection isn’t just about what’s convenient at the moment, but rather doing all you can to avoid the immense stress and financial loss that comes with a damaged property, and ensuring you’re prepared before the next flood strikes.
If you’re ready to protect your property, contact us and speak to one of our flood experts today.