Should I buy flood insurance?

Question

Just got in escrow with a SF rental in Kansas city. It is on a corner street with a creek on the other side. I checked flood maps and see it is barely outside a flood zone. What are your thoughts?

Jennifer T. · Answer

Flood insurance usually is cheap if the property is in an X zone (no flood zone).  Typically less than $800/year and that's including the stupid $250 surcharge for a non-owner occupied property.  My personal home has $250K in coverage, plus $100K for property, and is something like $400/year...$650 if it wasn't owner-occupied.

I have a rental property...that actually flooded in Katrina, though I didn't own it then...but is now considered in an X-flood zone.  It's $150K in coverage, $50K property, for $740/year (including the $250 surcharge).

Floods are not likely to happen in an X zone but, when they do, it can cause tens of thousands of dollars in damage.  FEMA stats are that 20% of flooded homes are in no-flood zones.  A series of bad rainstorms or too much rain in too short a period of time could potentially cause any area to flood.  I know that happened in Baton Rouge about 5 years ago.  Major devastation with hundreds of homes/businesses destroyed.  But most people didn't have flood insurance because they weren't in a flood zone.

On the same token, a property in a non-flood zone could go 100+ years and never flood.

The conundrum of insurance!

I personally keep flood insurance on all my properties, even though all of them are now in no-flood zones after the flood maps changed a few years ago. Ironically, I didn't for some of them before the flood map change, because they were previously in flood zones and the insurance was too astronomical. But when the rates got reasonable, I jumped on it.

Waleep Alvi · Answer

Thank you so much for all your response. I have the same thought of not getting flood insurance. I just want to get the opinion of the experts here.

Clint Shelley · Answer

25% of all flood damage occurs to property outside of the flood zone. The maps and insurance is relative to the 100 year flood event. We're having them more frequently and more 500 year events. Property on the fringes are likely to get caught without coverage. If you plan on holding long term and if the policy is cheap, it's worth looking in to.

Clint

Cody Campbell · Answer

@Waleep Alvi

Flood insurance is usually something the bank needs if the property is in a flood zone. I have had friends denied flood insurance because they do not live in a flood zone. Kinda crazy, but I would get a quote and see if it wrecks your numbers or if it’s feasible.

Shiloh Cunningham · Answer

If you are able to, maybe you could ask the neighbors if they ever have an issue with flooding? If there is a low chance and there is no finished basement, I personally wouldn't bother with the flood insurance.

Lynn McGeein · Answer

Without the $250 surcharge for investment property, I would likely purchase flood insurance on my properties that are in Zone X, not special flood area, so not required for the loan, as the rates are only about $250 per property, worth the coverage until it doubles due to surcharge.

FEMA actually states that nearly 25% of homes that flood are OUTSIDE of the flood zone, so why place the burden of subsidizing others' flood insurance with these $250 surcharges just on landlords and businesses?  Instead, Congress should simply pass a law requiring that all insurance companies doing business in the US must have flood coverage built into their basic policies, for all of the approx 128 million households in the US, not just special flood hazard areas, then let insurance company actuaries calculate risk/premiums and let competition set the price, with possibly higher deductibles like many do to make it more affordable.  We could eliminate the national flood insurance program, and all insured homes across the nation are covered if their home floods in a freak storm, in or out of flood zone.

Requiring that health insurance companies cover pre-existing conditions didn't kill the health insurance market; they formulated rates based on required coverages.  Health insurance companies are apparently reporting record profits, and patients like my son and husband, both with pre-existing conditions, now have coverage instead of denials that could have bankrupted us.

Aigo Pyles · Answer

@Waleep Alvi

You take a flood insurance if it's required - if the property is in a high-risk flood area.

Michael Thach · Answer

My flood insurance is $599 / year for a 200k coverage and is in a not floodzone. So its kinda cheap. My duplex is in a non flooding area but when it rains the water is stocking up , so having floodinsurance is only $700 for the duplex. Even if it's not in floodzone , your investment can get flooded by rain, sewer or plumbing problems.

AJ Shepard · Answer

There are some banks that would require you to get flood insurance. Flood insurance is usually expensive. If you think that the property is outside the flood zone, I don't think it's necessary to still get one. There is a very low chance of a flood happening.

Should I buy flood insurance?

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