Mitigating Risk and Reducing Insurance Costs
What you pay for flood insurance often has a lot to do with how much flood risk is associated with your property. Mitigation not only helps protect properties from flood damage, but can also help reduce how much you pay for a flood insurance policy.
Under NFIP's pricing approach, risk is identified by leveraging FEMA mapping data and FEMA-produced models and tools in combination with industry standard commercial catastrophe models to develop rating variables. These rating variables provide the data necessary to accurately assess the risk at a structure level and therefore accurately price insurance. For residents considering more ways to reduce their premium, NFIP recommends the following flood mitigation options:
Elevate utilities
Something as simple as elevating the heating and cooling systems, water heaters, electrical panels, and other utilities so that they are less likely to be damaged or destroyed in a flood may offer flood insurance savings.
If the machinery or equipment that services your client’s building is located below the BFE, an annual surcharge may be added to their premium.
Instead, clients should consider using an attic, an extra closet, or an elevated platform to store utilities.
Install flood openings
For properties in the high-risk flood area, lack of proper flood openings can increase costs.
In the high-risk area, for all new construction and substantial improvements of fully enclosed areas below the lowest floor, the NFIP requires:
A minimum of two flood openings, on at least two exterior walls.
A minimum of one square inch of opening for each square foot of enclosed area.
The bottom of the flood opening must not be higher than 12 inches above the exterior grade.
To receive cost savings, flood openings must meet all the criteria listed above. Garage doors, windows, and exterior doors do not count as flood openings unless they have flood openings installed within them.
Fill in basements
The NFIP defines a basement as “any area of the building having its floor below BFE on all sides.” That means crawlspaces that are below BFE on all sides are considered basements as well.
Unless explicitly authorized, basements are prohibited and not covered by the NFIP.
If a home has an existing basement and your local officials determine that it is being substantially improved or is substantially damaged, the basement must be eliminated. Property owners can usually do this by backfilling the basement.
Elevate your home or business
Elevating a home is the fastest way to reduce flood insurance costs.
Those who live in the high-risk flood area can save hundreds of dollars each year for every foot that their structure is elevated above their community’s BFE. Elevating just one foot above the BFE often results in a 30% reduction in annual premiums.