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Paying for Flood Insurance in Texas

You can pay your flood insurance premium with a credit card (American Express, Discover Card, Master Card, Visa, or Diners Club) or cash, check, or money order. In addition, at your lender’s discretion, you may pay your premium through an escrow account established by your mortgage lender.

Who Pays for Flood Insurance?

The policyholder - who is the home or commercial property owner or their tenants - pay an annual premium for the flood insurance covering them based on their property's flood risk and the deductible they choose.

What are the Payment Options for Flood Insurance?

The payment options for flood insurance are ACH, credit card, cash, check, or money order. Credit card payments can be made using American Express, Discover Card, Master Card, Visa, or Diners Club credit cards. You can also pay for flood insurance through an escrow account established by your mortgage lender at your lender’s discretion.

Can I Finance the Flood Insurance Cost?

Yes. You can finance your flood insurance cost through premium financing if this option is available to you. Premium financing is a loan agreement between a policyholder and a premium financing company. The premium financing company pays your annual flood insurance premium cost to your insurance company, while you pay back the premium financing company in monthly installments based on the agreed payment structure. However, depending on your cash flow, flood insurance premium financing may not be the best option for you because of its interest rates and possible tax implications. Before deciding to finance your flood insurance cost, ensure to review the terms of the contract and consult a state-licensed insurance agent.

You can finance your flood insurance cost through the Small Business Administration (SBA) loans, personal loans, or salaried account deductions.

How Often is Flood Insurance Paid?

Flood insurance premiums are typically paid annually.

How Do I Send my Flood Insurance Bill?

To send your flood insurance bill, speak with your insurance agent or lender. Payment for flood insurance bills is to be made after receiving a renewal reminder from your insurance company or the National Flood Insurance Program (NFIP). Typically, you receive renewal reminders during the weeks leading up to your policy expiration date. Note that you can also check your flood insurance policy declaration form or contact your agent to know when to renew your policy.

Do I Pay Taxes on Flood Insurance?

Typically, you do not have to pay taxes on a flood insurance claim to fix your home after flood damage. Flood insurance pays to repair or replace covered items damaged during the flood. In most cases, you don’t get any taxable profit or income from the compensation you receive from your flood insurance company, and the IRS only taxes income. For instance, suppose your house gets flooded and incurs damage worth $25,000. After you file a claim and your insurance company assesses the damage, you will be paid only $25,000 to restore your house to its previous state before the flood. Thus, no income is recorded, meaning there is nothing to tax.

However, you may be taxed if you still have extra money after your property has been repaired or replaced. If you have to pay taxes on your insurance claim, you will get IRS Form 1099-MISC, Miscellaneous Income to help you file.

Is Flood Insurance Premium Tax Deductible?

Flood insurance premium paid by the homeowner, while residing in the property is not tax-deductible.

If you rent the home out, or in the case of a commercial property - flood insurance is tax-deductible as a business expense.

Can you Pay Flood Insurance Late?

No, it is not advisable to pay flood insurance late because late payments can adversely affect your premium and lead to a lapse in your insurance policy. Although flood insurance has a 120-day grace period before annual renewal, late payment may attract fines, and after the grace period, your flood insurance will lapse.

Does Flood Insurance Have a Grace Period?

Yes. Flood insurance has a 120-day grace period. FEMA extended the grace period from 30 days to 120 days due to the stretched budget caused by the COVID-19 pandemic. This means that if your policy expires on March 22, you have till July 20. If you file a claim during this period, you may still be compensated, but you will be required to pay the renewal premium before you can make a claim. There is no grace period for flood insurance after termination. If you fail to renew your flood insurance coverage after the initial 120-day grace period, your flood insurance will be terminated.

What to Do if you Can’t Pay for Flood Insurance?

If you can’t pay for flood insurance, and your home is damaged by flood, you may be able to get help from the FEMA Individuals and Households Program (IHP). The IHP offers grants to individuals whose homes are located in federally recognized disaster areas. In the event of flood damage, the IHP provides swift grants to restore your home to a habitable condition. The maximum payout of the IHP is $33,000 but be informed that the role of IHP grants is not to restore your home to the state it was before the flood. The grant will only restore your home to a habitable condition after the flood, preventing you from being displaced from your home. Apart from your home being located in a federally recognized disaster area, the requirements for getting IHP include:

  • The home has to be where you have resided for the most part of the year.

  • The home is not covered by flood insurance.

  • You or at least one of your co-residents must be a U.S. citizen, non-citizen national, or a qualified resident.

  • The home is uninhabitable due to the disaster.

Note that if you live in a flood zone and do not have flood insurance, FEMA will only permit you to make one IHP claim, after which other claims will be denied. You will need to purchase flood insurance to remain protected from following flood disasters.

Another option if you can’t pay for flood insurance and your home is damaged by flood is to get help from the Small Business Administration. Also, suppose you are ineligible to receive funds, or your home repairs exceed the maximum payout for an IHP grant. In that case, you can apply for a homeowners disaster loan from the Small Business Administration. You will be able to use the SBA loans to fully repair your home and restore it to its initial state before the flood damage. It can also be used to repair or replace your personal property, including your flooded car if it is not covered by comprehensive auto insurance. However, you can't use the money to upgrade your home past its initial state before the flood damage. The SBA provides a limit of $200,000 for the repair or replacement of a primary residence to pre-disaster condition. There is also a limit of $40,000 for the repair or replacement of personal property destroyed during a flood, such as clothing, cars, furniture, and appliances.

What the SBA offers is a loan, so you will be required to pay it back in due time. However, the loan’s interest rates are low, and the repayment periods are long; some are even up to 30 years. Like FEMA grants, a major requirement for getting an SBA disaster relief loan is that your home must be located in a federally declared disaster area. You are also only permitted to use the SBA home disaster loans to repair your primary residence. It won't cover business-related damages like your work equipment if you work from home.

Consult with a knowledgeable flood insurance expert to find out the other options you have if you cannot pay for flood insurance

Will my Flood Insurance Lapse if I Miss a Payment?

If you miss a payment, your flood insurance will not lapse immediately because there is a grace period for most flood insurance policies. During the 120-day grace period, you can make a claim, but you will be required to first renew your insurance policy before the claim can be processed.

Your flood insurance will lapse if the grace period expires and you still have not made payment. Speak to your insurance agent to know how long the grace period of your policy is.