Flood Insurance

12 Replies

I have a home in Indianapolis Indiana and the Flood Insurance keeps going up year after year, in just two years it has gone up 300 dollars. From what I understand this is regulated by FEMA, does anyone know how to get a lower rate? It is killing my ROI.


Thank You 

@Brandon Clymer

FEMA does regulate flood insurance and in my state(Arkansas), the minimum coverage is $100,000. I had a house that was worth $60,000, but had to pay for the 100,000, it is a racket. I shopped around and got a much better deal and then I raised my deductable to the max. I was penalized by a claim that was on the property prior to my purchase, but it got cheaper the longer I held it, so you might rerun it every year. The city also made improvements to the drainage and that helped, if any changes like that have happened, you might negotiate it down further. Good luck

The new $250 surcharge per year on investment property has greatly increased my premium as well.  They did it to keep subsidizing owner-occupants.  First, check your local flood maps, as I have found that the proposed new map in my area removes me from the flood zone, although doesn't help until it becomes effective.  

If you have not had a flood elevation done or you believe your property is higher than base flood elevation, it may pay to have it done and challenge it.  If you can pay off your mortgage, you can cancel your flood policy, but most people don't have or don't want to use that option. 

I, personally, don't know why they don't just make flood and other disasters simply a required part of all regular homeowners insurance for any insurance company wanting to do business in the US. Then the market will adjust where homes in areas that are too risky just can't get insurance so will draw cash only buyers willing to take the risk on their own, and the areas that are statistically safer will become the norm for people needing mortgages, with the benefit of no surprises when/if something happens as you know your insurance company is required to cover, maybe just a higher deductible. Even FEMA says over 20% of flood damage occurs outside of the mandatory flood zones, but I don't expect them to actually come up with a common sense fix, so I'm just avoiding future flood zone properties unless it's cheap enough to take the risk.

@Brandon Clymer First off, do you have an elevation certificate for the property? If not, its worth getting, I think its around $400.  That will determine the actual elevation of the house and will likely get a better rate than the neighborhood rate (not always).

Second, they recently changed the national flood insurance so that you can change your deductible as @Perry Ivy stated.  This is a recent change and very nice for investors, so you can determine you level of risk. Obviously you don't need contents coverage, so if your paying for that, you can drop it.

The rates have been going up recently due to changes in the laws that govern the flood insurance.  One big change is that non-owner occupant properties now way an extra $225 fee, that's on top of the base insurance rate.  That almost doubled some of my properties flood insurance.  That is not likely to change or increase, but its new.  The rest of the increases are also due to recent law changes and the attempt to make the flood insurance program self sufficient, thus higher risk areas are paying more.  

@Brandon Clymer FEMA updated the underwriting to the flood program 4/1/15. The main purpose is to wien the pogram off of subsities and be able to stand on its own. This is creating an increased premium for most, expecially those in high risk areas.

You may want to consider higher deductibles.  A $10,000 deductible was introduced (but must be taken for contents and building). This is for single family homes and two-to-four family dwellings. You may want to clear it with your lender.   

@Brandon Clymer the reason that it has gone up so much is because FEMA is no subsidizing flood insurance anymore. You may want to do an elevation survey to determine if it is actually in a flood zone. I was able to get a property in Indianapolis reclassified once by doing that. Just out of curiosity, what is the address?

@Mike D'Arrigo I got a elevation survey when I first purchased the property in 2013, I am in the zone by about a foot. The address is 2113 Pamela Drive. I am shopping around for new insurance I have been told that some insurance companies are now able to provide plans separate from FEMA. Thank you all for your assistance.

@Brandon Clymer there are alternative programs out there, but the more flexible terms only apply to commercial properties, or habitational properties of 2 or more units. So if you have a SFR, there is not an alternative that is priced differently.

Brandon, I would strongly suggest speaking with an insurance agent about private flood insurance. I have a policy through Lloyds of London and it only costs about 600 dollars a year, rather than the 1,200 I would be paying through a FEMA policy.

Also note that in that area (I live a block away and my rental is next door), Indianapolis plans to build a floodwall within the next year or so in order to eliminate the need for flood insurance.

So I am looking to purchase a property in my local college town and I am being told by the mortgage company that I need flood insurance. I have gotten a couple quotes and it is in the range from $3800/yr to $4500/yr. This is outrageous! This is going to kill my NOI if I can't figure something else out in regards to the insurance. Does anyone have any suggestions?

I have a whole article I wrote about it and can put you in touch with professionals who are VERY good. Here is my article:

https://www.biggerpockets.com/forums/61/topics/364937-reducing-flood-insurance-costs?page=1#p2316931