Lake life can be a great life, even if it is only part time. Many people live on this lake some full time and some part time. However what most people don't know is how this can impact flood insurance rates.


We want to discuss three things about flood insurance on Smith Lake in Alabama.

  1. How does residence type impacts flood insurance rates on Smith Lake in Cullman and Jasper Alabama?
  2. What flood insurance options are available in Cullman and Jasper Alabama?
  3. Who qualifies for the different options?
  4. How elevations are impacting your flood insurance rates

So how does this residency type impact flood insurance?

Well if you ask the National Flood Insurance Program it has about 250 things to do with it in Jasper and Cullman Alabama. You see if don't live in the lake house for at least 50% of the time then there is a $250 surcharge on your National Flood Insurance Program policy. While this surcharge stinks it can stink even more if you have multiple structures on the same property as your lake house.

So not only are you hit with these surcharges for each structure but you might be required to carry a flood policy on each structure depending on what the mortgage company requires.

Its not unusual for a bank to require flood insurance even if the main structure is not in the special flood hazard area. Unfortunately the National Flood Insurance Program only does one dwelling per policy.

So let's say you have 3 separate dwellings on the same property like a mother in law suite, then you would be looking at an additional $750 in non primary surcharges.

So is there anyway around these fees?

Not the with National Flood Insurance program but there is another option for flood insurance.


We have briefly discussed the National Flood Insurance Program which is the government funded flood insurance program. However what about private flood insurance.

What is private flood insurance?

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Private flood insurance is just like it sounds unlike the National flood insurance program which is provided by private insurance companies.

Let's discuss a few differences with these programs on the lake. First of all the National Flood Insurance Program only offers coverage up to $250,000 on the building and a $100,000 contents. Private flood insurance offers coverage on buildings into the millions and generally $500,000 on contents.

Another big difference between the two is private flood insurance offers additional living expenses and business loss of use.

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So if you use the lake house as a commercial property you might be able to get business loss of use which could help give you loss of income while it is repaired.

So is there just one private flood insurance option in the Smith Lake area?

Absolutely not there are multiple options available and it's important to understand that each uses different rating factors. However one thing they all have in common is no surcharges because a property is not being used a primary residence.

So who qualifies for these different flood insurance options on the lake?

Lets discuss 3 disqualifications for the National Flood Insurance Program first.

  1. If a property is in violation of the flood plain management guidelines then it would not qualify.
  2. Also if the property is completely over water annd was built after 1982 then it would not qualify. Other than these two requirements most properties
  3. If community does not partcipate in the National Flood Insurance program

So now that we know what disqualifies a property from the National Flood Insurance Program let's discuss some disqualifications for private flood insurance.

Private flood disqualifications

  1. Bank does not accept private flood insurance
  2. Property is on the severity loss property list

So why would a bank not accept private flood insurance? Well there could be a few reasons the first one might be if the loan type is a FHA loa.

FHA loans have their own guidelines when it comes to flood insurance. Currently in 2019 FHA only allows National Flood Insurance program policies. If you have a VA, USDA, or Conventional then private flood insurance should be acceptable by the bank as long as the policy states the following "This policy meets the definition of private flood insurance contained in 42 U.S.C. 4012a (b) (7) and the corresponding regulation:.

Now lets discuss the second disqualification for private flood insurance which is severity loss property.

What is a severity loss property?

Any building that has incurred flood damage for which:
a. 4 or more separate claim payments have been made under a Standard Flood Insurance Policy issued pursuant to this title, with the amount of each such claim exceeding $5,000, and with the cumulative amount of such claims payments exceeding $20,000; or at least 2 separate claims payments have been made under a Standard Flood Insurance Policy, with the cumulative amount of such claim payments exceed the fair market value of the insured building on the day before each loss.

So we have discussed how residence type impacts flood insurance rates at Smith Lake, we have discussed what the flood insurance options are available in the area, and who qualifies for the different options. As a property owner at smith lake its important that you know how the flood insurance options.

Let's discuss how elevations could be impacting your flood insurance rates. As you have seen on smith lake most homes are significantly elevated from where the boat houses are located.


However if you haven't had an elevation certificate completed more than likely you are over paying for flood insurance or even paying for flood insurance in the flood zone.

Why is this?

Well FEMA bases its flood maps on parcels, so as far as they are concerned all these structures are at the same elevation. If you have spent anytime at Smith lake you know this is completely the opposite some times as much as 50-100 feet.

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Maybe you have further questions about flood insurance at Smith lake? If so make sure to check out our YouTube channel or Facebook page where we do daily flood education videos. You can also check out our podcast The Flood Guru.

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Chris Greene


Chris Greene

President of The Flood Insurance Guru
M.S. in Emergency Management with a focus in Flood Mitigation