Location and Risk Factors
The first and foremost factor in calculating flood insurance is also the number one rule of real estate, location. Where the building is located has a big impact on how high the premiums are for flood insurance. The insurance company will calculate the risk involved in the particular location of the structure. This calculation accounts for the chance of a flood occurring based on the weather patterns and past history of the area, as well as the height of the building from sea level. Buildings on the beach or close to the water and in flood zones will have a much higher flood insurance premium as a rule, and those farther inland or higher up have a lower risk factor and therefore a lower premium.
Amount of Coverage
The second factor in calculating flood insurance is how much protection you want for your buildings. If you desire $500,000 in coverage on your building, the policy will be more expensive than one that desires $250,000 in coverage. The insurance company calculates the risk factor of a major flood occurring in your area based on the number of major floods that have occurred over the past 20 or 50 years, the potential damage that could be done to your building and the amount of coverage you will seek to determine a policy rate.
Type of Building
The final factor is the type of building that you own. The materials your building is made out of can affect the amount of damage that is created by a flood. Concrete buildings can withstand floods much better than a wooden home. Also, a concrete building on pilings that is raised out of the flood zone has somewhat less of a risk of damage to internal units. This could be considered by the insurance company when assessing your final policy cost, but the amount in which it affects the coverage price will vary.