Choosing a Flood Insurance Deductible
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A flood insurance deductible is the amount you'll pay out of pocket after making a flood damage claim with your insurance company. A higher deductible will lower the cost of your insurance, but if you make a claim, you won't receive as much money to cover the repairs.
Your flood insurance deductible is one of many factors that determine your flood insurance price. Many of these factors, such as the location and age of your home, cannot be changed. But you can usually adjust your deductible to save money on your premiums, or reduce how much you'll have to pay when you make a claim.
What is a flood insurance deductible?
If you have homeowners insurance or auto insurance, you're likely familiar with deductibles.
A flood insurance deductible is the portion of repair costs you'll cover when you file a claim.
Policies with a lower deductible have higher premiums, because the insurance company will be on the hook for more of the cost if a flood strikes your home. However, the reverse is true as well: Choosing a higher flood insurance deductible will reduce your premium, because it lowers the insurance company's risk and increases your financial risk.
Flood insurance deductibles are separated into two components: building and contents. The building deductible applies to flood damage to the structure of your home, such as the foundation or flooring. The contents deductible covers your personal belongings within the home, such as your furniture and clothing.
For example, say you have a flood insurance policy with a $2,000 building deductible and a $1,500 contents deductible. One day, a torrential downpour leads to high floodwaters that damage your home. Your insurance adjuster estimates that the damage to your foundation is $5,000 and the damage to some of your personal items — your television, computer and furniture — is $3,000. The total cost of repairs is valued at $8,000.
Flood insurance deductible payments…
Deductible | Total cost of repairs | Payment by your insurance company | |
|---|---|---|---|
| Damage to your building | $2,000 | $5,000 | $3,000 |
| Damage to your personal property | $1,500 | $3,000 | $1,500 |
If you file a claim, in this case, you will be responsible for $3,500 ($2,000 for the building deductible and $1,500 for the contents deductible). Your insurance company will pay the difference between the estimated $8,000 in damage and your deductible ($4,500).
As this example illustrates, your company will pay a higher share if you choose a lower deductible. However, the lower your deductible, the higher your flood insurance premium will be.
How does your deductible affect the cost of flood insurance?
A higher deductible will make your flood insurance cheaper. Most flood insurance shoppers purchase a policy backed by the government's National Flood Insurance Program (NFIP), which has fixed premium discounts by level of deductible.
If you're seeking a private flood insurance policy, you can check quotes online to calculate how your deductible affects your premium.
Whether you're purchasing NFIP or private flood insurance, be sure to talk with your insurance company to figure out the best combination of deductible and premium for your needs.
NFIP flood insurance deductibles
If you're buying NFIP flood insurance, your deductible and premium will be governed by them. NFIP policies can include discounts of up to 45% on premiums, depending on the deductibles you choose.
For instance, suppose you live in a single-family home in a high-risk flood zone, which is true for most homes covered by NFIP policies. For these types of buildings, the NFIP has minimum deductibles based on building coverage: $1,000 minimum for $100,000 or less in coverage and $1,250 for more than $100,000 of coverage.
As this table shows, discount rates can depend on your deductible. This can range from 0% for a $1,000 deductible to as high as 45% for a $10,000 deductible, which is the maximum deductible available for NFIP flood insurance.
Building deductible | Contents deductible | Initial discount |
|---|---|---|
| $1,000 | $1,000 | 0% |
| $1,500 | $1,000 | 1% |
| $2,000 | $2,000 | 7.5% |
| $3,000 | $2,000 | 10% |
| $5,000 | $3,000 | 20% |
| $10,000 | $10,000 | 40% |
With NFIP, increasing your contents deductible gets you a bigger discount than increasing your building deductible. As a general rule, increasing your building deductible by $1,000 will discount your premium by 2.5%. Increasing your contents deductible by the same amount will get you a 5% discount on your premium. However, the deductible discount is one of many calculations affecting your NFIP flood insurance premium, so your final price may not reflect these estimated discounts.
NFIP deductible options could be limited if your property isn't in a high-risk area. For example, if you're in a flood zone designated as low to moderate risk, you may qualify for a cheaper form of NFIP insurance called a preferred risk policy.
These policies are recommended because of their lower premiums. You also gain added flood protection, because deductibles are fixed at one of two low levels, depending on your coverage limits. Policies with building coverage limits of $100,000 or less have a $1,000 deductible, and policies with limits over $100,000 have a $1,250 deductible. These deductibles apply separately to each type of coverage — building and contents.
When shopping for a flood insurance policy backed by the NFIP, several factors will determine your deductible options. Before buying a policy, you should talk to your insurance agent about options for your property and get estimates for different deductibles.
Private flood insurance deductibles
If you're one of the rare shoppers opting for private flood insurance, you can typically go online and find out how your deductible will affect your premium. Many major private flood insurance companies offer the option to calculate an instant quote online with adjustable deductibles. This is true of national companies, such as The Flood Insurance Agency, and regional companies, such as TypTap Insurance.
Private flood insurance companies commonly offer a $2,000 or $5,000 deductible for each type of coverage — building and contents.
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