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Can you save money on flood insurance?

Flood insurance rates are soaring, thanks to new legislation that changes how premiums are subsidized, and that redraws flood zone maps. But there may be ways for homeowners to save on their flood insurance premiums.

The federal government provides flood insurance in the United States through the National Flood Insurance Program (NFIP). The Biggert-Waters Flood Insurance Reform Act hikes annual premiums for federally subsidized flood insurance by as much as 25 percent for hundreds of thousands of homeowners. 

In addition, the government also has redrawn flood zone maps to better reflect the risk of flooding to certain homes. Such maps reflect the severity or type of flooding in a given area, and help determine flood insurance rates for properties in those areas.

save money on flood insurance

The most recent changes reflect the government's desire to put the NFIP on more solid financial footing by charging prices that more accurately reflect a property's flood risk, says Lynne McChristian, Florida representative for the Insurance Information Institute.

Whose flood insurance costs are going to rise?

The new standards are being gradually phased in for most homeowners, beginning in 2013.

About 5 percent of policyholders -- including those who have subsidized policies on non-primary residences, businesses and properties that have been subject to repeat flood losses in the past -- will see their rates jump by 25 percent immediately, according to the Federal Emergency Management Agency (FEMA).

Homeowners whose rates are scheduled to rise due to remapping won’t see any rate change until the second half of 2014, FEMA says.

If you're facing significant new flood insurance premium costs, you probably wonder if something can be done to lower those prices.

The answer is "yes," according to FEMA. But it won’t be easy.

Do you need flood insurance?

"Once your floor gets wet -- and as it moves up through the structure -- you're going to have a lot of damage," he says. "If you get flooded and you can't get it dried out quickly, the (cost of damage goes) up dramatically," Reinhold says.

In addition, storm surges and raging river torrents can destroy homes.

Homes are most at risk if they reside in flood plains, which NFIP defines as any land area susceptible to being inundated by floodwaters from any source.

However, danger lurks in other places, too. One-third of federal flood-disaster assistance goes to homes in moderate- to low-risk areas, according to the NFIP.

Homes and buildings with mortgages from federally regulated or insured lenders that are located in high-risk flood areas must have flood insurance, according to the NFIP.  Private lenders also can require homeowners to purchase flood insurance, even if it's not required under federal rules.

Changing the structure of your home

Modifying your existing home according to FEMA recommendations is one way to lower your flood insurance costs, possibly by hundreds of dollars.

For example, utility equipment that sits below the base flood elevation will add an additional surcharge to your insurance premium, according to FEMA. Base flood elevation differs from community to community, and is defined as the elevation that can be reached by a flood that has a 1 percent chance of occurring in any given year.

Utility equipment would include any machinery or equipment associated with:

  • Air conditioning.
  • Electrical.
  • Heating.
  • Plumbing.
  • Ventilation.

FEMA suggests moving such utilities to higher ground, as such as in an attic, an extra closet or an elevated platform.

Modifying flood openings also helps. Flood openings are vents that allow water to pass through, which prevents water pressure from building up and destroying walls and foundations. Buildings in the flood plain must have two openings with 1 square inch of opening per square foot of enclosed area. The bottom of the openings cannot be higher than 1 foot above the finished exterior grade.

Doors and windows don't count as openings unless they have openings installed within them.

Moving your home

Another way to reduce the cost of your flood insurance is to move your home from its present spot to a location less at risk of flood damage. The home is detached from its foundation, jacked up and placed on a wheeled vehicle. It then is moved to the higher elevation.

The original foundation is demolished and a new foundation is built at the new site. All utility lines then are connected.

If you move to a natural grade above the base flood elevation, you may not need to purchase flood insurance at all, FEMA says. However, the cost to move a home can be significant. FEMA's most recent figures indicate that the cost to move can be from $67 to $99 per square foot of the house's footprint for a frame house, or $96 to $116 for a masonry house.

Finally, if you can't -- or won't -- physically move your home, consider elevating it above your community's base flood elevation. FEMA says this is the fastest way to reduce annual flood insurance costs.

"You'll save money for every foot above the base," McChristian says.

For example, a home with its first floor elevated 1 foot above the base flood elevation can result in an annual flood premium reduction of 30 percent, according to FEMA.

Homes can be elevated in several different ways, FEMA says. Some homes are raised on hydraulic jacks and held by temporary supports while a new or extended foundation is constructed.

In other cases, the home is left on its foundation, but a new floor is added to the top of the home. Meanwhile, the lowest level of the house – which previously was used for living space – now serves for parking, storage and access to the house.  

You may have to obtain a flood elevation certificate to prove that your home now qualifies for this discount. This certificate is used to verify the distance from the lowest floor of your house to the ground.

Talk to your insurance agent about hiring a professional, such as a licensed engineer or land surveyor, who can provide a flood elevation certificate.

Costs of elevating a home vary widely, according to FEMA. Depending on the type of home and how high you plan to elevate the structure, costs can range from $29 per square foot of the house's footprint to $96.

How much can you save?

Some of these changes can be expensive. But FEMA says the savings on flood insurance premiums can be significant, particularly if you stay in the home for many years.

In a FEMA brochure, the government agency envisions a home in a flood plain that’s required by the lender to carry $100,000 in coverage at a premium of $1,255 per year.

The owners then make the following modifications:

  • Install proper flood openings.
  • Elevate utilities. This would include raising any machinery or equipment that services your home -- such as for electrical, heating, ventilation, plumbing and air conditioning purposes -- so it’s no longer at risk of flooding.
  • Remove the sub-grade crawl space. This can be done by filling the space in with pea gravel or another suitable material, according to FEMA.
  • Elevate the house.

All those changes reduce the annual premium down to just $190 per year, FEMA says. 

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