Help Clients Pay Less for Flood Insurance

As an agent, you can help clients reduce their risks and costs by taking advantage of the following opportunities.

Under Risk Rating 2.0: Equity in Action, the amount that clients pay for their annual flood insurance premium is calculated based on many factors, including flood types, distance from a flooding source, frequency of flood, elevation, and the cost to rebuild a property. 

The National Flood Insurance Program (NFIP) encourages customers to work with their agents to discuss their cost reduction options.

Choosing a higher deductible

As with car or homeowners insurance, choosing a higher deductible will lower their premium but will also reduce their claim payment, meaning they will need to cover the difference out of pocket.

Clients can choose different deductibles for building and contents coverage. The deductibles will apply separately to building and contents claims.

Increasing the deductible on a home’s flood insurance policy to the $10,000 maximum could reduce the annual premium by up to 40%. However, using the maximum deductible might not be appropriate in every financial circumstance, and may not be allowed by lenders to meet mandatory purchase requirements.

Each year, check with your clients to review their Policy Declarations Page, confirm their deductible and coverage amounts, and to ensure they understand their specific flood insurance risks and opportunities.

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What is Base Flood Elevation (BFE)?

BFE refers to the elevation that flood waters will reach or exceed during a "100-year flood," or a flood with a 1% chance of occurring in any given year.

Providing an Elevation Certificate

If your client’s building is in a high-risk area, an Elevation Certificate (EC) may provide important information to help inform mitigation actions that will lower flood risk and ensure compliance with community floodplain management ordinances.

Under Risk Rating 2.0: Equity in Action, an EC will no longer be required to purchase coverage. Instead, FEMA will use its tools and resources to determine the first-floor height of a building as one of the factors used when calculating rates. However, a property owner may choose to provide an EC and submit it to their agent to determine if it will lower their cost of insurance. ECs will continue to be used for floodplain management building requirements, which can affect eligibility for Community Rating System discounts.

Mitigating their risk

What your clients pay for flood insurance often has a lot to do with how much flood risk is associated with their property. Mitigation not only helps protect properties from flood damage, but also can help reduce how much clients pay for their flood insurance policy. 

With Risk Rating 2.0: Equity in Action, risk will be identified more robustly by leveraging FEMA mapping data and FEMA-produced models and tools in combination with industry standard commercial catastrophe models to develop rating variables. These rating variables provide the data necessary to accurately assess the risk at a structure level and therefore accurately price insurance. For clients considering more ways to reduce their premium, NFIP recommends the following flood mitigation options:

  • Something as simple as elevating the heating and cooling systems, water heaters, electrical panels, and other utilities so that they are less likely to be damaged or destroyed in a flood may offer flood insurance savings.

    If the machinery or equipment that services your client’s building is located below the BFE, an annual surcharge may be added to their premium.

    Instead, clients should consider using an attic, an extra closet, or an elevated platform to store utilities.

  • For properties in the high-risk flood area, lack of proper flood openings can increase costs.

    In the high-risk area, for all new construction and substantial improvements of fully enclosed areas below the lowest floor, the NFIP requires:

    • A minimum of two flood openings, on at least two exterior walls.
    • A minimum of one square inch of opening for each square foot of enclosed area.
    • The bottom of the flood opening must not be higher than 12 inches above the exterior grade.

    To receive cost savings, flood openings must meet all the criteria listed above. Garage doors, windows, and exterior doors do not count as flood openings unless they have flood openings installed within them.

  • The NFIP defines a basement as “any area of the building having its floor below BFE on all sides.” That means crawlspaces that are below BFE on all sides are considered basements as well.

    Unless explicitly authorized, basements are prohibited and not covered by the NFIP.

    If your client’s home has an existing basement and your local officials determine that it is being substantially improved or is substantially damaged, the basement must be eliminated. Property owners can usually do this by backfilling the basement.

    If your community has adopted basement standards, property owners in the high-risk area with basements will bear a 15 to 20% increase in their flood insurance premium.

  • Elevating a home is the fastest way to reduce flood insurance costs.

    Clients who live in the high-risk flood area can save hundreds of dollars each year for every foot that their structure is elevated above their community’s BFE. Elevating just one foot above the BFE often results in a 30% reduction in annual premiums.

  • Existing structures: One of the most effective mitigation options is relocating an existing home to an area of the property located above the BFE or outside the high-risk flood area. This method may be costly, but can significantly reduce flood risk and the cost of flood insurance.

    New construction: If your client is preparing to build a new home, work with them to evaluate the property to determine how and where to build based on BFE and flood risk.

For more on mitigation, including information on costs, technical limitations, and permit requirements, review the Homeowner’s Guide to Retrofitting.

NFIP funding for elevation or relocation

If your client’s home or business is damaged by a flood, they may be required to meet certain community building requirements to reduce future flood damage before they can repair or rebuild.

To help clients cover the costs of meeting those requirements, the NFIP offers policyholders up to $30,000 of Increased Cost of Compliance (ICC) coverage. ICC coverage can help pay for elevation, relocation, and demolition.

Clients considering ICC coverage are encouraged to review the Increased Cost of Compliance brochure with their agent and discuss their options with a local building official or floodplain manager.

Encouraging community action

Agents and clients can encourage their communities to participate in the Community Rating System (CRS) or improve their CRS rating.

CRS is a voluntary incentive program that recognizes communities for implementing floodplain management practices that exceed the NFIP minimum requirements.

In exchange for a community’s proactive efforts to reduce flood risk, policyholders can receive discounted flood insurance premiums up to 45%. The discount is calculated based on the extent of the community's efforts to reduce the risk of flooding.