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Help Clients Pay Less For Flood Insurance

Under the National Flood Insurance Program’s (NFIP) pricing approach, your clients’ premium is based on many different factors, including flood types, distance from a flooding source, frequency of floods, elevation and the cost of rebuilding a property.

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Choosing a higher deductible

If your clients choose a higher deductible, it will lower their premium but will also reduce their claim payment. This means they will need to cover the difference out of pocket.

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

Raising the deductible on a property’s flood insurance policy to the $10,000 maximum could lower the yearly cost by up to 40%. However, this isn't always the right choice for everyone's financial situation. Also, some lenders may not allow it if it doesn't meet their requirements.

Review with your clients their insurance details and their Policy Declarations Page every year to make sure they know their deductible and coverage amounts and help them understand their flood risk and the different opportunities to lower the cost of their flood insurance policy.

Providing an Elevation Certificate

If your client’s property is in a high-risk area, an Elevation Certificate (EC) can offer important information to help guide actions that can lower flood risk and ensure compliance with community floodplain ordinances.

Under NFIP's pricing approach, an EC is no longer required to purchase coverage. Instead, FEMA uses its tools to figure out a building's First Floor Height. This height is used as one of the factors for calculating rates.

However, a property owner can provide an EC and submit it to their agent to see if it will lower their cost of insurance. ECs are still used for floodplain management building requirements and can impact eligibility for CRS discounts.

Mitigating their risk

Flood insurance costs are often based on a property’s flood risk. Mitigation helps protect properties from flood damage and can help lower insurance costs.

Under NFIP's pricing approach, risk is assessed using FEMA mapping data, FEMA's tools and models and industry-standard catastrophe models to develop rating variables. 

These rating variables provide the data needed to assess flood risk and accurately price insurance. For clients considering more ways to reduce their costs, consider the following options:

Elevating things like heating and cooling systems, water heaters, electrical panels and other utilities can help protect them from flood damage. These actions may offer flood insurance savings.

If the equipment for your client's building is below the Base Flood Elevation (BFE), a yearly extra charge may be added to their premium.

Instead, clients could use an attic, an extra closet or an elevated platform to store utilities.

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

In high-risk areas, for all new construction and major 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 only count as flood openings if there are flood openings installed within them.

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

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

If your client's home has a basement and local officials decide it is being substantially improved or is substantially damaged, the basement must be removed. Property owners can usually do this by backfilling the basement.

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

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

Clients in high-risk flood areas can save hundreds each year for every foot that their building is elevated above their community’s Base Flood Elevation (BFE). Elevating one foot above the BFE often results in a 30% reduction in annual premiums.

Existing structures: One of the most effective mitigation actions is relocating an existing property to an area above the Base Flood Elevation (BFE) or outside the high-risk area. This may be costly but can significantly reduce flood risk and the cost of flood insurance.

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

NFIP funding for elevation or relocation

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

To help 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 floodproof (if it’s not a home), elevation, relocation and demolition.

Clients considering ICC coverage should review the Increased Cost of Compliance brochure with their agent. They should also discuss their options with a local building official or floodplain manager.

Another way to get help with the cost of elevating their home or business is through a FEMA or NFIP grant program. Grants are managed by states and local communities. Each state decides which projects it will fund and for how much. For clients interested in mitigation grants, they should contact their local floodplain manager or visit FEMA’s Hazard Mitigation Grant overview.

Encouraging community action

Agents and clients can encourage their communities to participate in the CRS or to improve their CRS rating.

CRS is a voluntary incentive program. It rewards communities that go beyond the minimum NFIP floodplain management requirements.

When a community works to lower its flood risk, policyholders can receive a discount up to 45% off their flood insurance premium. The discount is based on the community's efforts to lower flood risk.

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

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

Is your client’s property being mapped into a high-risk flood area?

Learn more