If you're purchasing NFIP flood insurance, your deductible and premium will be governed by NFIP standards. Whether you're purchasing NFIP-backed flood insurance or private flood insurance, be sure to talk with your insurer and figure out the best combination of deductible and flood insurance premium for your needs. If you're seeking a private flood insurance policy, you can check quotes online to calculate how your deductible affects your premium. The vast majority of flood insurance shoppers purchase a policy backed by the government's National Flood Insurance Program (NFIP), which has fixed premium discounts for certain levels of deductibles. How does your deductible affect the cost of flood insurance?Īll else equal, choosing a higher deductible will make your flood insurance cheaper. However, the lower your deductible, the higher your flood insurance premium will be. As this example illustrates, your insurer will pay for a higher share of flood damage if you choose a lower deductible. Your insurer will pay you for the difference between the estimated $8,000 damage and your deductible in this instance, $4,500. If you file a claim, in this case, you will be responsible for $3,500 of the damage - $2,000 to cover your building deductible plus $1,500 to cover your contents deductible. The contents deductible relates to damage to your personal belongings within the structure of your home, such as your furniture or clothing. The building deductible applies to flood damage to the structure of your home, such as the foundation or flooring. However, the reverse is true as well: Choosing a higher flood insurance deductible will reduce your flood insurance premium because it lowers your insurer's risk and increases your financial risk if you are struck by flood damage.įlood insurance deductibles are separated into two components: building and contents. Policies with a lower flood insurance deductible will have higher premiums, as your insurer will be on the hook for more of the damage in the event that a flood strikes your home. A flood insurance deductible is the portion of damage costs you'll cover when you file a claim with the insurer. If you have a policy for another type of coverage, such as homeowners insurance or auto insurance, you're likely familiar with insurance deductibles. How does your deductible affect the cost of flood insurance?.The agency has worked closely with its Direct Servicing Agent (DSA) and Write Your Own (WYO) program participating insurance companies to implement this legislation.įor more information about subsidized rates and reducing insurance costs, please visit to learn more about map updates, grandfathering, and the newly mapped procedure. HFIAA also applied an annual surcharge for all policyholders in the amount of $25 per year for renters and owners of primary residences and $250 per year for owners of non-primary residences and non-residential buildings. The changes in 2014 restored grandfathered rates and repealed certain rate increases to also address the cost concerns. HFIAA mandated that FEMA develop an affordability framework aimed at providing targeted assistance for policyholders in addition to dealing with BW-12 affordability requirements. At that time, Congress recognized that removing discounts might cause flood insurance to become unaffordable for some households and mandated in BW-12 that FEMA study flood insurance affordability to address that concern.īecause of concerns about rising premiums from constituents in multiple communities, Congress later passed the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA), which rolled back some of the changes implemented under BW-12 and recognized additional affordability challenges associated with increased premiums required by the BW-12 implementation. Under the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12), Congress sought to build a more sound financial framework for the NFIP by directing FEMA to remove the discounts for some policyholders with homes insured by the NFIP, so that policyholders would be given flood insurance rates that more accurately reflected their expected flood losses. In 2018, FEMA engaged the broader policy community, including academia and other government agencies, and developed an affordability framework, in response to a congressional mandate. The Evaluation of the National Flood Insurance Program (2006) Flood Protection Structure Accreditation Task Force Report to Congress (2013)įEMA Flood Mapping: Enhancing Coordination to Maximize Performance (National Academy of Public Administration, 2013)
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