Flood Insurance Premiums

By Lynne McChristian June 23, 2015

Rainy season is here, and parts of Florida know it all too well as some areas experienced heavy rainfall in the past 24 hours – with more on the way, almost daily. And, that reminds me that my flood insurance premium is due.

Renewing flood insurance coverage should be a no-brainer for those living anywhere near a body of water.

For me, it is a full-brainer, as each year I reconsider my decision – because I can. I have a so-called Preferred Risk Policy (PRP), meaning my property is at low risk for flood damage so the mortgage company doesn’t require flood insurance. But because I also know all too well that 20 percent of flood insurance claims come from low- to moderate-risk flood zones, I will renew. A recent trip to assess Houston’s flood damage reinforces this decision.

Most standard homeowners insurance policies do not cover flood damage; a separate flood insurance policy is required. There’s considerable confusion over flood insurance with all the changes in the flood insurance program. And, the cost is going up; so is the deductible amount. Since 2010, the cost of a PRP has gone up about 21 percent, and the deductible was increased 25 percent this year – from $1,000 to $1,250 for each type of coverage, one deductible for the building and one for contents inside it. The coverage amount remains the same, at $250,000 for the building and $100,000 for contents.

Preferred risk policies all cost the same: $405 annually, plus the $25 fee tacked on this year for primary homes. That fee is a surcharge, a sort of Plan B approach to compensate for the revenue that won’t be coming in because flood reforms were slowed down. Flood insurance at $430 a year may seem like a high price to pay to some people. Yet, here’s another way to look at it: It’s a small price to pay for the $350,000 in flood protection – and rain is in the forecast – again.