Flood risks are rising
If you live in a floodplain or are considering buying a home in one, you aren’t alone. Over 15 million U.S. homes are thought to be at risk of flooding, which is 70% higher than what FEMA estimates.[1]
Flooding is the most common and costly natural disaster in the United States and the risk of flooding is only increasing due to climate change (due to rising sea levels and changing precipitation patterns).[2]
But what does “at risk for a flood” really mean? What are floodplains, flood zones and flood factors and how do they affect your need to get flood insurance? Read on to learn the ins and outs of flood risk terminology.
- Floodway: The channel of a river or other watercourse and adjacent land areas that must be kept free of encroachment to allow for the passage of the base flood without increasing the water levels. During a flood, the floodway functions as part of the waterway.
- 100-year floodplain: These are areas with a 1% chance of flooding annually. These regions are often referred to as areas with a high risk of flooding. They are also labeled as Special Flood Hazard Areas (SFHA) by the Federal Emergency Management Agency (FEMA).
- 500-year gloodplain: Areas with a 0.2% chance of flooding annually, indicating a moderate risk of flooding. These areas are less likely to experience floods annually compared to the 100-year flood plains but still carry significant risk.
What are flood zones?
When dealing with insurance companies, you are more likely to hear the term flood zone used to categorize flood risk for properties.
Essentially, it is the same as floodplains, but a more nuanced look at categorizing risk. On FEMA flood maps, flood zones are labeled with letters B, C, X, A or V. Here’s essentially how those break down:
- Moderate flood risks: Low-to-moderate-risk flood zones are marked with letters B, C or X. The risk of flooding here usually does not require flood insurance. These correspond to a 500-year flood plain or .2% chance of flooding.
- High flood risk: Zones that begin with an A or V on FEMA flood maps face a high risk of flooding. These correspond to a 100-year flood plain or a 1% chance of flooding.
You can find out what type of flood zone your home is in through FEMA.[4]
What is your Flood Factor?
Just when you thought you had found all the possible ways to categorize your home’s flood risk, enter: the Flood Factor. The Flood Factor is another method of categorizing the flood risk of individual homes. It was created by the non-profit First Street Foundation.
A property’s flood factor is an indicator of its 30-year risk of flooding. Properties with higher Flood Factors are either more likely to flood, more likely to experience high floods or both. Flood Factors range from 1 through 10 as follows ranging from: minimal (1) to extreme (10).[5]
While knowing your Flood Factor can be helpful, it’s worth noting that it isn’t used by the National Flood Insurance Program to calculate rates. The NFIP handles the majority of flood insurance policies in the U.S. According to a survey by the Insurance Information Institute, 78% of homeowners who determined they are at risk of floods purchased flood insurance—35 percent from a private insurance provider and 43 percent through the NFIP.[6]
Calculating flood insurance rates
So does the letter marking of your flood zone determine how much you pay for flood insurance? Not exactly. While risk level is considered, insurance companies look at your property specifically and its individual rating factors to determine your rates.
Factors that affect rates include:
- **Flood risk:**While not the only factor, higher rates apply in areas with higher flood risk, such as the 100-year flood plain.
- Type of coverage: Rates differ depending on whether the coverage is for the building, contents or both.
- Property value: Higher-valued properties may have higher premiums due to the greater amount at risk.
- Building characteristics: Factors such as the age of the building, construction materials and whether it has a basement affect rates.
- Elevation: Buildings in flood-prone areas that are elevated above the base flood elevation can often qualify for lower premiums.
For more information about how the NFIP specifically calculates flood insurance rates, visit this resource.
Wrapping up
Living in a flood plain significantly impacts the insurance requirements and rates for property owners. Understanding the type of floodplain your property is located in and the corresponding insurance requirements is essential for adequate protection.
Homeowners and businesses should regularly review their flood risk and insurance coverage to ensure they are adequately protected against potential losses due to flooding.