- There are two types of risk areas that are used to determine the premium that is paid for flood insurance coverage. They are moderate- to low-risk areas and high-risk areas. The amount of insurance to purchase can vary depending on the risk area where the property is located. The amount of insurance to purchase can also vary depending on the amount of coverage that is needed for the property.
- The amount of insurance to purchase may depend on the type of policy that can be purchased. Flood policies come in many types, including a preferred-risk policy, a standard-rated policy and a high-risk policy. Flood policies have been developed for residential and nonresidential properties for each type of policy. A preferred-risk policy will cost much less for the same amount of coverage than a standard-rated or high-risk policy.
- A flood policy is available for many types of buildings for commercial and individual use. Polices are for a standard homeowner, a renter, a condo owner, and a commercial owner or renter. Renters will typically only need to purchase flood insurance to cover the contents only. A homeowner or commercial owner needs to consider the cost of the building as well as contents.
- Individuals who have a mortgage in a high-risk flood area are typically required to have flood insurance. Some mortgage lenders may also require flood insurance for properties that are located in a moderate- to low-risk area. The amount that is required depends on the value of the building and what is specified by the lender.
- The rates for a flood insurance policy are set by the National Flood Insurance Program. This means that all insurance companies that offer flood insurance will have the same rates. Rates are based on the risk area, the date the home was constructed and the building materials that were used. The amount of flood insurance to purchase depends on the cost to repair a home or to replace lost contents.
