How Much Does Flood Insurance Cost in New Jersey?
Flood insurance can be a boon for New Jersey residents if they suffer a devastating flood. How much does flood insurance cost in New Jersey, though? Homeowners typically pay between $572 and $2,049 per year, with an annual average cost of $1,001.
- The cost of flood insurance in New Jersey typically runs between $572 and $2,049 per year, with an annual average cost of $1,001.
- The cost of New Jersey flood insurance will depend on the home’s location, elevation, and building materials, along with the coverage options selected by the policyholder.
- Policies purchased through the federal government’s National Flood Insurance Program often include building property and personal property coverage, but homeowners will need to buy a private flood insurance policy to get loss of use, loss avoidance, and debris removal coverage.
- Although flood insurance is not mandated by New Jersey state law, mortgage lenders may require homeowners to buy a policy if their property is at significant risk for flooding.
With its wide expanses of beautiful coastline beaches, New Jersey is a desirable place to build vacation homes and weekend getaways, and its industry and proximity to tourist destinations make it an attractive and convenient place to live. The long band of coastline, however, along with miles of rivers and freshwater lakes, means that New Jersey is a state where flooding is a common natural phenomenon and more likely than it is in some other states. All six of New Jersey’s coastal counties, areas bordering the Delaware River, and a number of other low-lying areas are considered high-risk flood zones, so while the New Jersey state government doesn’t require property owners to carry flood insurance, it’s strongly recommended. Also because of the high likelihood of flooding, the average cost of flood insurance in New Jersey can be fairly high. Insurers expect to have multiple large claims after a significant storm, and rates reflect that risk. But how much does flood insurance cost in New Jersey?
Property owners in New Jersey can expect to pay an average of $1,001 annually for flood insurance, with prices typically ranging from $572 to $2,049 per year. There are many factors that affect the total price of flood insurance, though, and there are steps that insurance customers can take to lower their costs.
Factors in Calculating Flood Insurance Cost in New Jersey
Because of New Jersey’s diverse terrain, the type of flooding and the level of risk vary significantly, and with those levels of risk come different insurance costs. The Federal Emergency Management Agency (FEMA) is responsible for assessing the risk of flooding across the country. FEMA redesigned its risk rating system in 2021 to shift from wide-range assignments of risk to property-specific assessments based on the location, structure, and other characteristics of an individual building. The program, called Risk Rating 2.0, works essentially as a flood insurance cost calculator for each individual building. It takes all of these factors into consideration and assists flood insurance providers in setting rates, similar to the way a credit score helps lenders determine interest rates. FEMA’s maps are easily translated by insurance providers into flood insurance rate maps that make it easier for customers to see where their property fits.
Flood Risk and Zone
FEMA has a long-standing flood risk-zone rating system: Zones labeled A or V are considered high risk, zones labeled B or X have a moderate risk of flooding, and areas labeled C are considered low risk. Areas in A or V zones will have the highest risk rating, while rates in B or X zones will be lower, and areas in C zones have the lowest rates because of the reduced risk of flooding. Flood risk changes over time as climate change and neighborhood development change the angles and direction of water runoff, so it’s important for property owners to periodically check their risk by entering their address into FEMA’s My Flood Zone tool and learn how to use the flood zone maps.
Anyone who has watched a news broadcast during a hurricane has seen homes that seem to be precariously perched over the water on what appear to be stilts. While they look unsafe in videos showing those homes buffeted by high-speed winds and wind-driven rain, those property owners may have taken a FEMA-approved step to elevate their homes above the floodwaters raging below and, in doing so, may have lowered their flood insurance rate. Floodwaters don’t care about barriers such as doors—whether they’re lazy or rushing, floodwaters will push and seep right through door frames and into a home. Therefore, the higher above ground level a door is, the lower the risk of floodwater to a home, and the lower the flood insurance rate.
FEMA defines an elevated building as one that has no basement and has a first floor elevated by posts, piers, pilings, columns, or certain types of foundation walls. In the past, FEMA issued elevation certificates for buildings that met this criteria; homeowners could present these elevation certificates to insurers when shopping for flood insurance to help determine flood risk and therefore the price of the policy. Since the implementation of Risk Rating 2.0, those certificates are no longer required, but the standards are still used to guide new construction in high-risk areas. As such, presenting an elevation certificate, if one is available, will often still help a homeowner secure a lower rate. Homes that are not elevated and have full basements will likely have higher rates.
City or County
While water doesn’t respect borders on maps, New Jersey has particularly clear-cut areas that present higher flood risks to homeowners. The coastal counties are at the highest risk of flooding, and New Jersey has been grazed or hit by several high-impact hurricanes over the last decade. Because those counties likely face the highest risk for devastation, it may cost more to insure properties located in those areas.
To encourage communities to take steps to protect their properties, make them safer from flooding, and reduce their overall risk, FEMA created a program called the Community Rating System (CRS). Through this program, the government and the community as a whole actively seek to reduce their likelihood of flood damage by managing floodplains, acquiring flood-prone property for purposes other than building structures, and taking steps to reduce damage to existing buildings. People who live in CRS communities receive a discount on their flood insurance rates.
The cost of flood insurance is, in part, based on risk, and because the construction and characteristics of a building affect the potential level of damage during a flood, those characteristics also affect insurance rates. Older buildings are likely to cost more to insure. This is because they were not built to current code standards and details like handcrafted millwork and plaster will cost significantly more to repair and restore than contemporary wallboard. Solid perimeter foundations are more likely to be damaged or destroyed during a flood because there’s nowhere for the water to go.
On the other hand, pier foundations and solid foundations with built-in flood openings allow water to pass underneath, which means water can’t actually enter the building until it has climbed much higher. As such, buildings with those types of foundations will likely earn a lower insurance rate. Once the water has risen above the foundation, it will enter the home and begin to do even more damage, so elevated first floors where the water can’t just wash up the front yard and spill immediately into the first floor of the building will typically cost less to insure than ground-level floors.
Another significant characteristic that can drive insurance costs is the location of utilities and machinery in the building. When the hubs of the electrical, plumbing, and HVAC systems are located in the basement, they are more likely to be destroyed by floodwaters and will require replacement not just of the machinery but of entire systems—sometimes even when only a few inches of water have entered the basement. Placing the machinery and utility hubs on more elevated floors can reduce the cost of flood insurance.
Coverage Type and Amount
Flood insurance can include two basic types of coverage: one covers the structure of the building and its systems (called building property coverage), and another covers the furniture and belongings within the building (called personal property coverage). There are several kinds of add-on coverage, such as loss of use, debris removal, and loss avoidance, some of which are only available from private insurers. The types of coverage selected will affect the cost of insurance for floods. When there’s flooding, insurance coverage of only one tyep will lead to a lower premium, but it could result in a significant out-of-pocket expense should a flood occur and part of the property be uninsured.
Rates increase as coverage limits go up, so customers can also control costs by choosing a lower total coverage amount, which is the maximum payout from the insurance company per event or per term. Doing so can be a gamble on the part of the customer, though. Paying for less coverage in order to secure a lower rate at the policy’s inception may backfire in the event of a serious flood if the amount of damage significantly exceeds the amount of the policy’s coverage.
As with many other types of insurance, flood insurance has a deductible. This is the amount of money an insurance company will withhold from the total payout on a flood insurance claim. Selecting a lower deductible could mean paying more up front, but it could lead to a larger payout if the policyholder needs to file a flood insurance claim. Meanwhile, choosing a higher deductible will likely lower the policyholder’s insurance rates, but it will also mean that more money will be withheld from any payout they may stand to receive on a future insurance claim.
National Flood Insurance Program vs. Private Insurance
Homeowners insurance excludes flood coverage in part because flooding can cause truly catastrophic damage to nearly every home and structure in an area—sometimes a wide area—affected by a flood. Homeowners insurance companies realized that to accommodate those payments and remain in business, their premiums would skyrocket and they would lose customers, so many private companies don’t offer flood coverage. Recognizing that property owners would be ruined by the costs of rebuilding after a flood, FEMA introduced the National Flood Insurance Program (NFIP). NFIP policies only include building property coverage and personal property coverage, and the maximum coverage amount is $250,000. Despite those limitations, NFIP flood insurance allows anyone who resides in a participating community to access reasonably priced flood insurance coverage. The NFIP also offers a reduced-cost program for those who live in lower-risk zones called the Preferred Risk Policy.
Not all communities participate in the NFIP, in which case the only way for homeowners to purchase insurance is through a private company. Also, the NFIP doesn’t offer additional coverage for loss of use, loss avoidance, and other forms of flood protection. Some property owners may feel that they need more coverage than the $250,000 flood insurance maximum coverage offered by the NFIP. In those scenarios, New Jersey homeowners can choose to purchase all of their flood insurance through a private insurer, or they can choose to purchase their primary policy through the NFIP and supplement the policy with an additional private policy to increase the coverage limit or add different types of coverage.
While rates on NFIP policies are set by FEMA regardless of which company services the policy, purchasing from a private insurer will require homeowners to exercise the same due diligence as with any other insurance policy. Customers will want to research companies that offer flood coverage; request a flood insurance quote from several companies; then compare rates, deductibles, and coverage amounts before selecting an appropriate policy. By taking the time to research some of the best flood insurance companies, New Jersey homeowners may be able to find the right coverage for their specific needs.
Actual Cash Value vs. Replacement Cost Coverage
Insurers offer two types of payout on their flood insurance plans. It’s important for homeowners to understand the difference, as it can affect both the size of a payout on a claim and the overall cost of an insurance policy.
- Actual cash value: This coverage pays out based on the original cost of an item damaged by a covered loss minus a depreciated amount based on the age and condition of the item at the time of loss. Essentially, the insurer will pay the amount that the item would fetch on the market if it had been sold the day before the flood. This is usually the less expensive coverage option because the payouts are lower. However, out-of-pocket costs are likely to be higher after a disaster because replacing damaged items will almost certainly cost more than the amount the policyholder will receive from their claim payout.
- Replacement cost coverage: With this option, insurance companies reimburse policyholders for the current cost to replace any covered items that were damaged in a flood up to the policy’s coverage limit, without taking into account depreciation. This type of coverage costs more for the insurance company, however, and it will therefore cost more for the insured. In an area likely to be hit by flooding, it may be worth policyholders paying the extra cost up front so they will have the funds available to replace covered belongings damaged in a flood.
Types of Flood Insurance in New Jersey
The right combination of flood insurance coverage is as unique as the many homes it protects. There are different types and levels of coverage for homeowners to consider, and those choices can impact the cost of their flood insurance. The type of coverage included with flood insurance will determine which items or structures the policyholder can claim for reimbursement under the terms of the policy. Customers need to make sure that the type of insurance they have matches the risks to their property. As such, it’s important to read policy documents carefully before and after purchasing the policy—during the claim-filing process is not the time to discover that there are notable gaps in a policy’s coverage.
Building Property Coverage
Building property coverage specifically includes the structural elements of a building and fixtures that are permanently attached. Starting with the actual structure, building property coverage includes foundations, walls, staircases, and building anchors. In addition, building property coverage includes some permanently installed decor items, which can include wall-to-wall carpeting, window blinds, bookcases, and paneling.
Finally, building property coverage covers damage to whole-house systems—electrical, plumbing, and HVAC systems, for instance—as well as appliances that are part of those systems, permanently installed appliances, and fuel tanks. Specifically excluded from building property coverage are yard items such as decks, patios, pools, and landscaping; this is because they are not part of the solid structure of the building. However, detached garages are typically covered, as they constitute a separate building on the property.
It is important to note that building property coverage policy documents will often list everything that is covered under the policy—if an item, appliance, or structural component is not listed, it is typically not covered. Many upsetting building property coverage claim denials occur because a customer assumed something was covered—perhaps because the item was covered under a previous plan—and failed to check to make sure it was covered on the current policy before disaster struck. Emotions run high during the claims process because everyone is under emotional and financial strain, so it’s worth it for homeowners to take the time to read the policy documents closely long before the insurance needs to be used.
Personal Property Coverage
Personal property coverage protects the homeowner’s belongings rather than the structure of the home itself. Personal belongings, including clothes, furniture, electronics, and kitchen items are typically covered under most personal property policies (less the deductible). Decor items and appliances that can be moved, such as area rugs or carpets, curtains, clothes washers and dryers (these are not considered permanent installations), and window or portable air conditioners are often included with this type of coverage.
When homeowners are considering what is protected by personal property coverage, it is important to note that almost all flood insurance policies exclude items that have been stored in a basement. Basements are the first part of a home to be overrun with floodwater, so insurers have an expectation that valuable possessions will be stored in a higher, safer area in higher-risk flood zones and do not cover items stored below ground level. In addition, items including cash and legal documents are not covered by most personal property policies.
Loss of Use Coverage
When a home is severely damaged or destroyed by floodwater, the residents may need to relocate for a short or long period while the building is cleaned and repaired or rebuilt. Loss of use coverage, which is also called additional living expense coverage, helps pay the unexpected costs associated with living in temporary quarters during repairs. This coverage can include costs for:
- Short-term rentals
- Equipment rental
FEMA’s primary focus is on home and business restoration, so the NFIP does not offer loss of use coverage. Private flood insurance companies often offer this option as either a stand-alone policy to augment an NFIP policy or as part of a comprehensive private flood insurance policy.
Loss Avoidance Coverage
For those living in high-risk flood zones, there are specific steps that can be taken to reduce the overall risk of flooding to a property. Some of these steps include making permanent changes to the structure of the house, while others are temporary measures that are taken when a flood threatens the area. All of them have a cost, which NFIP recognizes might be prohibitive for customers who need the precautions the most. The NFIP offers coverage up to $1,000 to help pay the expense of protecting the property, as well as $1,000 toward the cost of moving property to a safer location for those who carry a standard flood insurance policy through the NFIP. The coverage can be applied to precautions including:
- Purchasing sandbags to prevent water incursion;
- Purchasing and installing water pumps to keep water levels low during a flood;
- Using plastic sheeting and lumber to create barriers;
- Using fill to create temporary levees or berms to redirect water away from the home; and
- Paying for rentals and labor to facilitate temporarily moving personal belongings to a safer area.
Other expenses may qualify as well, and there are some limitations to consider. However, this coverage is a good-faith effort on the part of the NFIP to help policyholders take action and reduce the costs of repairs after a flood.
Debris Removal Coverage
Uprooted trees, children’s toys, the contents of an overturned dumpster, the contents of the neighbor’s garage, and heaps of trash and mud can be piled on a property after floodwaters recede. It’s hard to even know where to start cleaning up, and the debris may be unsafe to handle without professional protective equipment. Just as many homeowners insurance companies cover debris removal after a tornado, many private flood insurers offer debris removal coverage that allows customers to hire an appropriate company to haul away and dispose of the debris or rent a dumpster to make it easier to manage. The NFIP does not offer this type of coverage, however.
Do I need flood insurance in New Jersey?
New Jersey does not require property owners to carry flood insurance. This doesn’t mean that residents do not need flood insurance, however; the state has simply chosen to let its residents make their own choices regarding this type of coverage. There are, however, situations in which insurance may be required—or at the very least, strongly recommended.
Mortgage Lender Requirements
Every mortgage extended on a home is a risk taken by the lender—the lender assumes that based on its criteria, the borrower is likely to pay back their mortgage without interruption. If that doesn’t happen, the lender can repossess the home and sell it to recoup its losses. In the case of a serious flood, a lender may find itself with no viable building to reclaim and sell. Requiring that borrowers in mid- to high-risk flood areas carry flood insurance is a way for lenders to protect their investments. Mortgage lenders often require borrowers to carry homeowners insurance, and requiring flood insurance is simply an extension of that same theory for at-risk properties, as homeowners insurance only covers water damage under certain circumstances.
Even if there’s no mortgage lender demanding insurance, flood coverage shouldn’t be something that New Jersey homeowners overlook or brush aside as something to be handled later. New Jersey is a fairly low-lying coastal state, crisscrossed with rivers and lakes. Every property in the state could be at a reasonable risk of flooding, whether it’s because of a strong hurricane that took an unexpected shift in direction or a severe downpour a few miles away that suddenly overtopped the boundaries of a river. Floodwaters can shift a home off its foundation or burst through the front door and destroy a great deal of property in a short period of time. In addition, if a property has ever received federal disaster assistance during a previous flood, it qualifies as high risk, and the property owner must carry flood insurance to be eligible for any future federal disaster aid.
Proximity to Water
A significant element of Risk Rating 2.0 is a building’s proximity to the edge of a water source. Earlier flood-zone boundaries were more general, identifying neighborhoods as high or low risk. The newer assessment considers how far water would have to travel to make it into a home. New Jersey has a massive coastline flanked by small cottages and luxurious beach homes, with tightly packed neighborhoods fanning backward away from the shoreline. When the ocean comes inland, those streets function as conduits and give the water paths of minimal resistance to get farther and farther inland. A mile inland seems like a safe distance until the water arrives at the front door. Risk Rating 2.0 will suggest what the level of danger may be, but if the property is in a beach community—or is close enough so the occupants can drive to the beach for just a part of the day—flood insurance is probably a must-have. Water damage restoration costs can add up quickly, so owners of properties at risk for even mild flooding may want to consider purchasing coverage.
How to Save Money on Flood Insurance in New Jersey
Prevention is a great first step to saving money on flood insurance. The more preparation a homeowner takes to secure their home, the safer it will be from flooding, and the bigger the discount an insurer can provide.
- Consider FEMA’s recommendations for reducing flood risks when building or remodeling to make the building more flood-resistant, which can lower premiums.
- Take advantage of FEMA’s loss avoidance coverage to prepare the home before floods arrive.
- Fill in the basement or otherwise elevate the home to keep floodwaters away from the interior for longer.
- Consider installing first-floor drains to help water drain faster. This reduces the time the water spends sitting in a space and reduces structural failures and mold and mildew growth.
- Provide an elevation certificate to the insurance company for pricing on a policy.
- Reduce the policy’s total coverage amount. Note that although this will reduce premiums, it may make repairs and replacement more costly after a flood.
- Choose a higher deductible to reduce the up-front cost of insurance premiums.
- Choose either building property coverage or personal property coverage instead of both. This can result in significant savings, but at a risk: Should a serious flood occur, there will be greater out of pocket expense since the policy covers less.
Questions to Ask About Flood Insurance in New Jersey
Every home is different, and every flood risk has a slightly different angle to it. In addition, each customer has a different level of tolerance for risk. A knowledgeable NFIP agent or private flood insurance provider should be able to answer the following questions to help a shopper select the correct coverage for a particular situation:
- What flood risk zone am I in, and how likely is it my home will experience flooding?
- When does the coverage become active? Is there a waiting period?
- What is the claims process, and how long does the company take to pay out funds?
- What does the policy exclude from coverage?
- What steps can I take to prepare the home for a flood and reduce my premiums?
- How much do flood repairs generally cost in my area?
- Do renters need flood insurance? (Although the landlord is responsible for the building itself, renters are usually able to purchase coverage for their personal property, and it’s an important question to ask.)
The threat of a flood can be frightening: Floods happen fast, and they’re dangerous. Knowing a flood insurance policy is in place long before one is needed can give New Jersey homeowners peace of mind that they will be financially protected if the worst comes to pass. Finding the right policy can be daunting, though, so it can be important to address some of the most common questions homeowners have about flood insurance—what does flood insurance cover, for instance—to help get them started.
Q. Is flood insurance required by the law in New Jersey?
The state of New Jersey does not require flood insurance, though it is strongly recommended in most areas. Homeowners may be required to have flood insurance by their mortgage lenders depending on the property’s risk of flooding. In addition, any home that has previously received federal aid after a flood must carry flood insurance afterward in order for the homeowner to be eligible for any further federal aid.
Q. Does flood insurance cover hurricanes?
Flood insurance covers the water damage caused by hurricanes, so flooding, pooling water, and rain damage will all be covered by flood insurance. Wind and tree damage will likely be covered separately by standard homeowners insurance policies. It may be worthwhile to check with some of the best homeowners insurance companies in New Jersey to see what kind of property damage is covered during a flood.
Q. Is flood insurance transferable in New Jersey?
NFIP insurance can be transferred to new owners if a house is sold, and there’s a great reason to do so: Transferred policies do not trigger the standard 30-day waiting period before coverage becomes effective—coverage remains continuous. Therefore, a home that already has flood insurance offers a great incentive for buyers. It does not happen automatically, though. There’s a process to make the transfer, as the new owner might choose to set a different deductible or a different coverage amount. Some may also need to make the transfer through an escrow account if the new mortgage lender prefers to pay through escrow to ensure that coverage stays in effect. Private flood insurance cannot be transferred, though.