Flood insurance rates are likely rising; how to save money
BIRMINGHAM, Ala. (WBRC) - Rain continues to be a common theme across Alabama in 2021 as some cities have reported multiple damaging floods. Most recently, tropical system Nicholas prompted catastrophic flooding in Tuscaloosa, resulting in two deaths.
If the significant weather events this year have prompted you to consider purchasing flood insurance, acting in the coming days could save you money.
Nearly all flood insurance policies are administered through FEMA’s National Flood Insurance Program, or NFIP. It will transition to a new system on October 1. The overhaul is called Risk Rate 2.0, which calculates the policy costs based on the size and value of a home rather than flood zones.
Alabama EMA Director Brian Hastings believes property owners should consider all costs when creating emergency preparedness plans.
“If you wonder if you need flood insurance, ask this question: ‘Does it rain?’ And if the answer is yes, maybe you should consider it,” Hastings adds. “Because one inch of water is usually $25,000 of damages and most flooding events are not covered by homeowners insurance.”
Some 21% of Alabamians insured through the NFIP will see a rate drop. The remainder will incur a modest increase, about $10 a month. Less than 3% will pay more than $20 extra a month.
“If you live in a high-risk area with a lot of rain, the probability of you having some type of flooding event within the 30 years of your mortgage is likely 25%”, Hastings explained. “If it does flood and you lose $25,000 of your home or things that you treasure, you can’t get those back. FEMA is not going to make you whole and you’re left the burden of all the expenses.”
In 2021, the NFIP has already paid out more than $1.1 billion in flood insurance losses in Alabama.
“What we found over time is that 90% of the cost of disasters are caused by flooding across the United States,” Hastings said.
Those who carry flood insurance will be given the option of keeping the current premium or transitioning to the new system in April.
When shopping for flood insurance, experts remind consumers that the NFIP has set claim limits which may not cover some items like living expenses, which may be covered by a private insurer.
When determining whether to purchase flood insurance through the NFIP or private insurance, it’s important to know:
- the actual cash value of the coverage
- whether it covers alternative living expenses
- if debris removal is covered
- the waiting period before a claim is fulfilled
- the policy’s rebuild limit
- whether the insurer can cancel the policy
It’s important to note: those who have properties outside a designated high-risk flood zone can still obtain insurance through the NFIP or through private insurance.
List of NFIP providers: https://nfipservices.floodsmart.gov/wyo-program-list
Birmingham residents who have questions about the National Flood Insurance Program can contact the city’s Hazard Mitigation Services at 205-254-2479.
Policy holders who live in a city or county involved in the NFIP’s Community Rating System or CRS could benefit from additional savings. Those local communities include Birmingham, Decatur, Homewood, Hoover, Tuscaloosa, and Pell City.
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