Finished or Unfinished: How Do Basements In Birmingham Alabama Impact Flood Insurance Rates

Birmingham Alabama is a rapidly growing housing market. One of the benefits of the gorgeous homes through out Birmingham is the basements. Tuscaloosa to Birmingham to Gadsden Alabama is considered tornado alley of Alabama. The area continues to get hit by tornadoes like the 2011 Tuscaloosa tornado and the 1998 Oak Grove tornado. So people see this as a protection measure. Some of these basements are finished and some are unfinished.

So let's imagine that after looking at house after house in Birmingham Alabama you have finally found the perfect house in Hoover Alabama. It has the schools you want, the unfinished basement you have been looking for, and you can picture the perfect family entertainment area.

You make an offer only to find out a couple of days later that it's in a special flood hazard area. You are like what is a special flood hazard area?

The mortgage company notifies you this is an area that has a 1% chance of flooding in any given year. Then they throw you the curve ball that flood insurance is going to be required. You think great how much is that going to increase my house payment every month?

You think why didn't the seller tell us it was in was in a flood zone?

Well this could have happened for a couple reasons. It could be that the home was recently moved into the special flood hazard area within the last 12 months.

The other reason could be that the seller chose not to disclose it. Since Alabama is a buyer beware state the seller has the right not to disclose it.

The moment you find this out you want to pause and have a conversation with your realtor about the due diligent period.

It could take a few days to collect all the accurate flood information and if you need to walk away from the deal you want to make sure its an option.

So you make a couple of calls to different insurance companies but you get a different answer each place you call.

So frustrating right?

You think why in the world can I not get a straight answer from anyone. You are ready to say forget it lets move on, then you find this blog.

So let's give you the answers you are looking for so you can make the best decision for your family.

How Is A Basement Going To Impact Your Flood Insurance in Birmingham Alabama?

It's important to understand that two factors are the driving force of flood insurance premiums in Birmingham Alabama.

1. Elevation
2. Location

Elevation can be the main factor as to why you have low flood insurance premiums or high flood insurance premiums.

We recently spoke to a property owner in Texas that was paying $3000 a year for flood insurance but her neighbor was paying $700. She couldn't understand why such a large difference. Well come to find out she had a basement while her neighbors home was on an above grade crawlspace.

You see according to FEMA a basement is below grade or below ground on all 4 sides. So the deeper the basement is the emptier your wallet could be or couldn't be. The more negative the elevation is then the higher the flood insurance premium could be.

However remember like we mentioned before all 4 sides must be below ground. So if you have a walkout at the ground level then this might create a significant savings for you on the flood insurance. The reason for this is there is no negative elevation on that one side of the building.

Also this property would more than likely not be considered a basement but an elevated building with a walk out.

It's important to understand that FEMA or the National Flood Insurance Program is not your only option for flood insurance in Birmingham Alabama.

There is a separate private flood insurance market that can provide multiple options many times 50% less than FEMA. Depending on your loan type you may qualify for these options. If you are doing an FHA loan you will be required to go through FEMA but if you are doing a different type of loan like a conventional, USDA, or VA loan you can take advantage of these private options.

Now that the smoke has cleared you have gotten the answers to your flood questions lets discuss that second burning question.

Is Your Flood Insurance In Birmingham Alabama Going to Skyrocket when you finish the basement?

It's important to understand exactly how finishing a basement will impact your wallet.

There is good news and bad news here

The good news is finishing the basement will not increase your flood insurance premiums, but that does not mean it won't have a major impact on your wallet.

One common negative thing about all flood insurance policies is the limited coverages they offer on basements.

Let's talk about the National Flood Insurance Program coverages first. The NFIP policy limits building coverage in a basement to things that make the building safe this includes but is not limited to circuit breakers, stair cases, and furnaces.

On the contents side it will cover things like freezers or refrigerators, but it's not going to cover that big screen tv or little johnny's new XBOX One.

Now lets talk about private flood insurance and coverages in the basement. Many private flood carriers will not store any thing that is stored below ground. There are a few companies that offer basement content coverage of around $10,000.

Its important whether you go with The Flood Insurance Guru or another company for your flood insurance needs that you understand your coverages.

If you decide to finish that basement its recommended that you reach out to your insurance agent to get a good understanding of what exact coverages you do have. This way you can decide what to store in the basement and what not to store.

If you have further questions about flood insurance on basements in Birmingham or any other part of Alabama make sure to visit our website. You can also check out our YouTube channel or Facebook page The Flood Insurance Guru.