All insurance policies come down to one key factor – RISK! Getting a flood insurance quote is no different. The higher the flood risk, the higher the cost. Conversely, using tips discussed here could dramatically lower a homeowner’s flood insurance premium. Before discussing ideas for lowering insurance premiums and protecting from floods, it is essential to get advice from an experienced flood mitigation specialist and flood insurance agent. Main points we want to accomplish for you today are showing you how to:
- Lower flood risk
- Decrease flood insurance payment
- Protect your assets (property and cash)
Flood Insurance Rate Increases
Over the years, FEMA has taken severe losses from flood claims or assisting those without insurance. It is especially true with recent hurricanes throughout the Southern and Eastern United States. Increased losses mean FEMA needs more funds to cover damages. That means increased flood insurance premiums in 2018 were no exception.
7 Ways to Lower Your Flood Insurance Quote
First of all, these tips are more manageable for a current homeowner. Alternatively, a buyer may only request from the seller or make plans for future ownership. A buyer may need to start with a higher premium, make home renovations, and then request a new flood review by the insurance company.
Key ways to potentially lower flood insurance premiums
- Elevation Certificate
- Elevating the home
- Removing enclosures on the first level
- Install residential flood vents
- Enroll in community rating system
- Converting ground floor living space
- Check for grandfathered policy
One term a buyer will hear very early on when looking at a home in a flood hazard area (or at least should hear) is an “elevation certificate.” A surveyor performs an elevation certification and it plays an essential role in the requirement of flood insurance.
Furthermore, it plays a crucial role in the flood insurance quote amount. The primary function of the FEMA elevation certificate is to determine and certify a structure’s elevation to the base floodplain level. The higher the floor level and other structures are above the flood plain level, then the lower the flood insurance premium. Conversely, the lower the floor level, the higher the premium.
The certificate comes in handy for determining if the structure is actually in a flood hazard area. For instance, the land may be in a flood hazard area but the structure itself may be in Zone X. Zone X does not require flood insurance, although it is still available. A buyer or buyer’s agent should always ask the seller for an existing and current flood elevation certificate up-front. It will save time and cost for the buyer.
Building a home in or near a flood hazard area?
Confirm in the elevation certificate that the structure was built in the best location on the property. Make sure appropriate measures are taken to protect the property against flooding as well as keep the insurance premium low.
Homeowners can also save with an elevation certificate
An elevation certificate is not just for buyers. Current homeowners could potentially save money in flood insurance premiums. A seller with a current elevation certificate could provide a copy to buyers. Buyers are then able to obtain solid insurance quotes up-front which give buyer confidence. Too many buyers are scared off by the unknown of flood insurance costs and the time it takes to determine an accurate flood inquiry. A seller with an elevation certification may have an advantage in attracting and keeping buyers.
Elevation Certificate Cost
A common question is, “How much does an elevation certificate cost?” That is a tough question to answer because it varies based on the local market, difficulty in determining elevation, and the individual surveyor’s charge. As mentioned above, a surveyor performs the flood elevation certification. A rough range figure would be $350 – $500. Keep in mind that it could go outside of this range.
Elevating your home
A huge determining factor of flood premium is the floor level, and other structures of the home compared to the base floodplain level. The higher the structure is above the floodplain, the lower the risk. Again, lower risk equals lower premium. Conversely, a home below the floodplain will make the premium much higher.
A possible solution is to elevate the home. Elevating the home could include increasing the crawl space or even adding stilts underneath. Elevating a home is not a small project. Therefore, it is highly recommended to hire a contractor who is experienced with raising a home. FEMA states, “A first floor elevated three feet above the base flood elevation, can expect to save 60% or more on annual flood insurance premiums.” In the case of living oceanfront, a 60% premium savings is significant. You will see several times how we mention involving a flood mitigation specialist. Why spend this kind of money only to find out it did not meet the full savings potential?
We actually have two renovation loan programs which allow for raising homes like this. These renovations are considered structural improvements and fortunately, OVM’s HomeStyle Renovation loan and FHA 203k allows for these. Technically, moving a home to higher ground is even allowed! Although, house movers require up-front payment in full. However, if the borrower can pay for the move, a renovation loan could reimburse the borrower! Pretty cool, huh?
Elevated homes on stilts, especially at the beach, help owners significantly in lowering flood insurance costs. But, enclosed areas below the living area may cause an increase in the flood insurance quote. Depending on the local area, certain sized enclosures result in higher premiums. We have seen experienced insurance agents and Realtors consult with flood mitigation specialists to make modifications to enclosures underneath the living space. These modifications made a huge difference in the flood insurance quote for buyers. For instance, there may be an enclosed storage area that exceeds the size limit by just a little. Usually, the small area could be removed or reduced in size.
Install Certified Engineered Flood Vents
FEMA states that homes which have enclosure walls beneath the base flood elevation must have flood openings. If there are no flood openings on a home, this will increase flood insurance costs dramatically. These openings are called certified engineered flood vents. When considering flood vents, it is key to consult a flood mitigation expert. Michael Vernon with Flood Mitigation Services explains, “Certified engineered flood vents are applicable to both commercial and residential properties. Flood vents are not applicable with a sub-grade crawl, first enclosed floor 1 foot or more below base flood elevation, partial crawl with living space on slab, and in many other scenarios. If a homeowner were to install vents in these scenarios and/or not follow other codes, there would be no premium relief.” So, it is obvious to consult an expert rather than make erroneous improvements.
Flood Insurance Savings Example By Installing Flood Vents
The flood vents must allow the automatic entry and exit of floodwater. Here is an example of an OVM Financial loan officer who installed flood vents to significantly save on premium. Cola Galvin – VP of Renovation Lending said, “We recently went from $1700 per year down to a premium of $620. Plus the total cost of installing the flood vents to the foundation and garage door was less than $500.” That’s a profit in the first year. Furthermore, it makes the home less susceptible to flood damage.
Community Rating System
If considering the purchase of a home in a flood hazard area, make sure to find out if the community is enrolled in the Community Rating System (CRS). If the community is enrolled, a flood insurance discount is possible. FEMA states “the discount is calculated based on the community’s efforts to reduce the risk of flooding.”
Converting Ground Floor Living Space
Sometimes a multi-level home may have a first floor beneath the base flood elevation. As mentioned, living space below the flood plain level increases an insurance quote significantly. Another consideration is to convert first floor living space into an open foundation. This would reduce heated square footage which does affect the living space and possibly value negatively. However, this conversion could make a huge difference in flood insurance premiums, potential future damage, and even help attract buyers. For further details on ground floor conversions, check out FEMA.
Michael Vernon with Flood Mitigation Services further states “FEMA has 9 diagrams designed to determine the foundation type of each structure. Every home in the U.S. is supposed to fit into one of these categories. Mitigation compliance is different for all 9. So premium relief applications apply differently to the individual structure type.”
Assume Grandfathered Policy
If buying a house in a flood hazard area, always ask if there is an existing flood policy. The policy may be assumable and there could be advantages. This is especially the case if the property and insurance are grandfathered in. Under the National Flood Insurance Program, grandfathering was created for owners that had flood insurance in place prior to the maps. Additionally, homes built to the standards relative to the map in effect at the time of construction may be grandfathered.
When assuming an existing policy, the prior rating will remain in effect even if the flood zone has changed. Although, this is only the case if there has been continuous flood insurance in place on the property. Each lender may be different in regards to allowing a buyer to assume an existing flood policy. Therefore, determine how much time is left prior to the policy renewal date and relay that to your loan officer.
Can I Buy Flood Insurance if Not in Flood Zone?
Yes! Plus, it is a lot cheaper. Regretfully, when hurricanes or other natural disasters happen, many of the victims are not even in a flood zone. Even the property may have never flooded before. But, when any area receives 12, 24, or more inches of rain, flooding can happen. Shoot, even the mountains have flood issues! The least risky is Zone X. Lenders do not require flood insurance in Zone X because FEMA states there is a .2% probability of flooding every year. Zone X is also known as the 500-year flood plain. Since there is a low risk, it is worthwhile discussing a flood insurance quote with an experienced agent.
Flood Insurance Professionals
No matter if buying, selling, or owning a home within a flood hazard area, it is key to have a flood insurance strategy meeting with an experienced professional. A knowledgeable flood expert will not only provide a strategy to provide protection versus flood damage but also save money on a flood insurance quote. Experienced professionals include flood mitigation specialists, flood insurance agents, and surveyors. As a team and individually, they offer key parts of a flood insurance plan. By developing and implementing strategies to lower the flood risks, the byproduct will be lower insurance premiums! Basically, planning up-front beats fixing mistakes later.
If looking for a flood insurance quote, our best advice is to get solid advice from professionals. Quality advice with a plan could help a homeowner invest in their home rather than send extra money to FEMA every year. If buying a home that may be within a flood hazard area, contact OVM Financial to walk you through the process.
Disclaimer: The purpose of this article is to provide general information that may or may not lower flood insurance premiums. Do not perceive this as advice specific to any certain project or area. If considering a flood insurance policy or a home within a flood hazard area, always consult an experienced flood professional.