I am frequently asked by prospective buyers of Florida real estate about flood insurance rates. This question is asked so often I decided to write this blog post to try to explain as simply as I can about this complex subject. It seems like a simple question…”how much is the flood insurance on this home?” Unfortunately there is not always an easy answer. Read on and I will explain why.
Everyone has heard the horror stories and they want to know what to expect when they get their first flood insurance bill. In this post, I will be speaking about just flood insurance. The other type of insurance you will want to know more about is homeowners insurance. I will cover that in a later blog post.
The entire state of Florida is in a flood zone
First and foremost the entire state of Florida is in a flood zone. Yes you read that correctly. Even the highest point in the state, Britton Hill at 345 feet above sea level is in a flood zone. I frequently get people asking for me to find them homes that are not in a flood zone but of course that is impossible if they want a home in Florida. The lowest risk flood zones to get is B,C, or X flood zones. (X is the zone you see the most in Charlotte and Sarasota County) Most real estate agents will mistakenly tell you that a specific home is not in a flood zone when in fact it is in an X flood zone. X doesn’t mean it’s not in a flood zone, it just means you are not forced to purchase flood insurance there. The B, C and X zones are in the 500 year flood plain and deemed not risky enough to require you to purchase flood insurance by your mortgage lender. Keep in mind that if you pay cash for a home, no one can force you to ever purchase flood insurance, it is purely your choice whether you do or not. If you have a mortgage, the mortgage lender will specify what zones require flood insurance to be carried on it. Once you pay off the mortgage, you can cancel the flood insurance if you deem that feasible.
Do I have to purchase flood insurance on my Florida home?
If you plan to carry a mortgage on your home, the zones that you need to look out for are the A and V zones. The V zones are very close to the beaches and are called velocity zones. If you are lucky enough to afford a home in the V zone you probably are not worried too much about the cost of the insurance so I will move onto the A zone. The A zone is the 100 year flood plain zone. This is the zone that causes the most headaches here in Charlotte and Sarasota County. If you buy a home in an A zone, and you have a mortgage, your bank will force you to carry flood insurance on the home. Not to worry though as there are ways to lessen the costs.
What determines the cost of Florida flood Insurance?
Elevation of the floor. The biggest factor that affects home insurance cost is the elevation of the floor level of the home in relation to the base flood elevation of the lot as provided by FEMA. If FEMA says that the base flood elevation of your home should be 10 feet, and the true elevation as determined by a surveyor is 10.5 feet, your insurance will be very reasonable in price. If in that same scenario your home is found to be at 8 feet, get out your checkbook as it is going to be expensive.
The age of the home. This one is directly related to #1 above. Prior to around 1976, builders didn’t pay much attention to the floor elevation when building a home here in Florida. After 1976 there was more regulation regarding elevation. You will find the older the home is the likelihood of a higher flood insurance policy as a general rule. If it’s a newer home the flood insurance will most always be a reasonable price compared to an older home.
How much you are insuring your home for? Of course this one goes without saying, but the higher amount you are insuring your home for the more expensive the flood insurance will be.
How high are your deductibles? This is another easy one…the lower the deductible, the higher the cost of your insurance policy. If you raise the deductible you assume more risk but your premium will cost less.
Are you insuring your contents? Keep in mind there are 2 parts to every flood insurance policy. The premium for the house itself and the premium for the contents coverage. You can always elect to delete the contents coverage if you choose of course. Also pay attention to contents coverage to see if you have full replacement value or if they pro-rate the value in relation to the age of the contents.
I plan to own my home debt free, should I buy flood insurance?
This is a question that only you can answer. As I mentioned previously, if you own your home and do not have a mortgage on it, no one can force you to purchase any types of insurances including flood insurance. I find that some of the older homes that have high insurance premiums are being bought by cash buyers and they are electing not to purchase flood insurance. Generally these people have enough of a rainy day fund to handle any cash outlays that a flood might cause. These people have calculated the risk of flood and decided it makes more sense to invest that money elsewhere. Sometimes in these cases the land the home sits on may be worth more than the home itself, so if a flood comes it just gives them an excuse to tear the home down and build a new one.
So how much does the flood insurance really cost?
Let’s get down to brass tacks, how much does the flood insurance on the home at 123 Imaginary Drive cost? There is no easy answer to this without some investigation and possible expense. The first thing to do is to determine if it is in an A or V zone. If it is, the next step is to get an elevation certificate. The elevation certificate is part of a survey and it certifies the base flood elevation of the home. Hopefully the current homeowner has this and can provide it to a prospective buyer. If not, the buyer may have to hire a surveyor to make one and that can cost around 200 dollars to get. Once you get the elevation certificate, send it to your favorite home insurance agent and let them give you a quote with your chosen coverages and deductibles. If the home is in the B, C or X zones, there is no need for an elevation certificate. Just call your insurance agent for a very reasonable flood insurance quote on homes in these zones.
Do I need to buy flood insurance in an X flood zone?
If you purchase a home located in the X, A, or B zones, you may want to consider purchasing flood insurance even though it is not required. Usually flood premiums in these areas are very cheap, maybe only 350 dollars per year, and it may make sense to go ahead and purchase the policy. In some cases, the elevation of a home in an A zone may only be a few inches in elevation different from a neighboring home in an X zone. Often one side of a street is in an A zone, and the other side may be in the X. If there was a Katrina like hurricane event here, the A and the X zone on that same street would likely get inundated with water. Better safe than sorry.
So as you can see there is no simple answer to “how much does flood insurance cost.” If you have questions, contact a local Florida insurance agent and they along with your DWELL Real Estate Realtor can assist you.