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    How a Flood Policy is Priced

    When researching flood insurance policies, whether by personal choice or by mandate from your mortgage company, price is likely one of the aspects that is high on your inquiry list. For many people, there are two policy options: the National Flood Insurance Program (NFIP) managed by the Federal Emergency Management Agency (FEMA), and private market flood insurance, both of which can be purchased through a licensed insurance agent. To determine which plan is best suited for your home or business and most favorably priced for your wallet, there are many factors that you should take into account. Listed here are some of the basic characteristics FEMA uses to evaluate properties and determine the flood risk.

    A flood policy price is calculated by taking the following factors into account:

    • Flood risk zone

    • Elevation of the building

    • Type of occupancy (single-family home, apartment, other residential, nonresidential, etc.)

    • Year the residence was built

    • Number of floors

    • Deductible and coverage amount and type


    Through the NFIP, flood insurance rates are set based off of the level of risk of a true flood to the property. Coverage is available for up to $100,000 for personal property and contents and up to $250,000 for the residential dwelling. The amount of coverage you choose to purchase will be a big influential factor in how much your policy will cost. Once the price of your policy is determined, it will not fluctuate from company to company or agent to agent; it is a set rate. One thing to keep in mind is that an NFIP flood insurance policy is only available in participating communities; however, most communities do participate.

    Private Market Flood Insurance and Excess Flood Insurance

    While private market flood insurance policies are very similar to NFIP policies, there are a few major differences to keep in mind when exploring your options and gathering rate quotes. These key variations include:

    • Available coverage amounts

    • Opportunity to purchase more inclusive coverage

    • Living expenses coverage until your home is ready to be lived in again

    Private market flood insurance does not have sanctioned coverage limits; therefore, the limits can vary from company to company. In many cases, insurance carriers can offer full coverage for reconstruction of your residential dwelling and replacement of personal contents, compared to $100,000 for personal property and contents and up to $250,000 for the residential dwelling that is available under NFIP. The available comprehensive options allow a homeowner to add coverage for exposures; such as detached structures, swimming pools, basements, and outdoor property.

    If your home does exceed the coverage limits put into place by NFIP and private market flood insurance, excess flood insurance is an option available to homeowners to ensure all of their home and belongings are covered. An excess flood insurance policy provides additional coverage over the amount NFIP or private market flood insurance insures for; these maximum coverage amounts may vary by insurance provider but are available into the millions of dollars for both home and contents.

    Flood insurance is one of those things you hope you never have to use, and as a result, would prefer to maintain affordable premiums. If you're interested in obtaining a flood insurance quote, click the banner below for a free, no obligation quote!

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    John Hannah

    John Hannah is the AVP of Product Management for SWBC Insurance Partners. In his role, he reviews and analyzes P&C insurance product programs to meet and exceed financial goals. He assesses the risk and profitability of prospective and existing clients, to include underwriting, coverage and pricing recommendations.

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