Ask the Agents #28: Do I need flood insurance?

Question: Do I need flood insurance even if my house is not in a flood plain?

Answer: Our answer is a hard yes. But for a little more nuance, we put your question to Leash Yu, president of Agency Yu, Inc., an insurance agency in West U. Here’s what he wants you to know:

On October 1, 2021, FEMA revamped their 1970s-era rating system for the National Flood Insurance Program (NFIP). This new system was billed as “revolutionary, simpler and more fair” for the nation. As we approach the second anniversary of this new rating system called Risk Rating 2.0, Houstonians are starting to realize that this may not be very “fair” for us. With average increases of 150% in the Greater Houston Area, it’s no wonder Houstonians are asking if buying flood insurance is still worth it.

August 2017, Hurricane Harvey, Kirby @ Shepherd Dr.

The answer is, if you live in Greater Houston, flood insurance is absolutely, 100% recommended due to the uncertainty of flooding in our area. After all, more than half of the damaged homes in the Tax Day storm in 2016 were outside the mapped floodplains, as were more than one-third of those during the Memorial Day flood in 2015. And as area development adds more and more concrete, there is less and less water-absorbing earth to soak up rainfall.

Here are a few things to know about flood insurance:

  • Damage to your home that is caused by water that rises into your home from the outside is not covered on your home insurance policy.
  • To have coverage for this, you must purchase a separate flood insurance policy from the National Flood Insurance Program (NFIP/FEMA) or from a private insurance carrier.
  • Flood insurance coverage is very specific and only covers the dwelling for a maximum of $250,000 and the contents for $100,000 (actual cash value). It does not pay for a rental home or hotel if your home floods.
  • If you live in a multi-million-dollar home, you can purchase more flood coverage than the $250,000 cited above.
  • If you live in a high-risk flood zone, your mortgage lender will require that you purchase flood insurance. But even if you don’t live in a high-risk flood zone or already have paid off your mortgage, you should still purchase flood insurance. Your insurance agent can tell you which flood zone you live in.
  • After Risk Rating 2.0 was implemented, the flood zone is no longer a factor in rating flood insurance. Consequently, flood insurance for homes in the high-risk zones could be less expensive than for homes not in the high-risk zone. This has caused quite a lot of initial confusion and frustration. If you currently have flood insurance and your home’s new flood insurance rate after Risk Rating 2.0 is higher than your current rate, FEMA will increase your flood insurance premium no more than 18% annually until you reach the new rate. Talk to your insurance agent for clarification.

If you are in the market to buy a home:

  • Make sure you get a quote for flood insurance during the option period.
  • Have your real estate agent ask the seller for a copy of their flood insurance to see if their current flood insurance policy is assumable. If yes, this could save you a bit of money.
  • If the new home is in a high-risk flood zone, ask the seller to provide their flood elevation certificate.
  • Regardless of the flood zone, ask the seller to provide the FEMA flood claims report.
  • Because of the increased cost of an NFIP flood policy, you can also get a quote for a flood insurance policy from a private insurance carrier.
  • After knowing all the facts about your new home, the flood zone and any claims report, work with your insurance agent to strategize the best path for you concerning flood insurance.
  • One final note, and this is important: There is a 30-day waiting period for a new NFIP flood insurance policy unless you are currently buying a home with a loan. In other words, if you already own your home and you learn of an approaching storm 10 days out in the Atlantic, it’s too late to buy flood insurance to go into effect for this storm. The required wait is 30 days.

Editor’s note: New updated flood maps from FEMA and the Harris County Flood Control District, originally expected to be released in 2022, are now scheduled to become available at the end of 2023. It’s expected that Harris County’s 100-year floodplain will increase by as much as 200,000 acres, according to an article earlier this year in the Houston Chronicle.