What Is The Difference In Flood Zones For Insurance

Flood damage can be costly.

Floods are one of the most common disasters in the United States. To protect homeowners from the cost of flood damage, the US government developed the National Flood Insurance Program (NFIP). The NFIP works with insurance companies to provide affordable flood insurance to all homeowners who live in communities that participate in the NFIP.


The Federal Emergency Management Agency prepares flood risk insurance maps (FIRM) for all communities that participate in the National Flood Insurance Program. In order to make the maps, FEMA analyzes various hydrologic data to determine the flood risk of a given area. All land is classified into one of three risk zones: high-risk, low-moderate risk and undetermined risk.

Risk Areas

High-risk areas have a one percent annual risk of flooding; over the course of a 30-year mortgage, this translates to a 26 percent chance of flooding. Homeowners in the high risk zone are required to have flood insurance if they purchase their home with a federally insured mortgage. Homes in the low to moderate risk have less than a one percent chance of flooding in a given year. If your home is in the moderate-low risk zone you are not legally required to carry insurance, although it is recommended. In the undetermined zone, no flood risk analysis has been conducted. Insurance rates reflect the uncertainty in risk.

Insurance Rates

Homeowners can purchase different amounts of insurance, up to $250,000 of building coverage, and $100,000 for contents. Homeowners can chose whether to insure just the building, just the buildings contents, or both the building and contents. Premiums depend on the amount of insurance and the risk zone of the building. For example, as of May 2010, a joint building and contents coverage plant of $250,000/$100,000 for the high risk zone has an annual cost of $2633. Premiums are higher in a high risk coastal zone, for the same coverage annual premiums will be $5,700. In the moderate-low risk area the same policy will cost $1,489 per year.

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Preferred Risk Policy

The National Flood Insurance Program’s Preferred Risk Policy protects commercial property in areas of low-to moderate-flood risk. Most businesses, farm buildings, churches and schools in these areas are eligible for the lower PRP rates, as long as the building does not have a significant history of flooding. Preferred Risk Policy rates depend on whether or not the insured building has a basement. For a buildings and contents policy with $250,000/$100,000 of coverage, annual premiums are $355 per year for buildings without a basement, and $395 per year for buildings with basements.

Excess Coverage

The amount of insurance offered by the NFIP is not enough to protect all homes. Homeowners looking to increase the amount of insurance on their property can buy an excess coverage policy from the insurance agent of their choice, provided they offer such coverage.

Undetermined Risk Zone

If your property is located in the undetermined risk zone, there is a good chance it is because your community does not participate in the NFIP. If you want your community to participate, you can petition your local government. In order to be a member of the program, a community must agree to practice sound floodplain management.