Alabama flood insurance: A guide to costs and coverages for boards and owners

What is Alabama flood insurance?

Alabama flood insurance is a specialized type of property insurance that covers damage caused by flooding, which is not included in standard homeowners or renters insurance policies. Flood insurance in Alabama is typically purchased through the National Flood Insurance Program (NFIP), administered by the Federal Emergency Management Agency (FEMA), or through private insurance providers.

This article is not intended to and does not constitute legal advice or create an attorney-client relationship. Board members should consult their association’s attorney to discuss the legal implications of their decisions or actions prior to proceeding.
 

Is Alabama flood insurance required?

In Alabama, flood insurance is usually mandatory when a property is located in a FEMA-designated Special Flood Hazard Area (SFHA) and its mortgage is made, guaranteed, or purchased by a federally backed lender such as Fannie Mae or Freddie Mac. FEMA considers any location with a 1% or greater chance of experiencing a flood each year to be high risk. Board-governed communities outside an SFHA may still require coverage under their governing documents or at a lender’s discretion.
 

How much is flood insurance in Alabama?

The cost varies widely based on the property's flood zone, elevation, type of construction, and chosen coverage limits. Properties in high-risk zones often carry higher premiums than those in moderate- or low-risk zones. Associations with multiple buildings may face varied premium rates for each structure, which can affect budget planning. Some private insurers may offer more competitive pricing or broader coverage options, making it worthwhile to compare quotes with an insurance broker familiar with Alabama flood insurance options.

Most condos and community associations purchase flood insurance through NFIP, as its rates are typically more competitive than private insurers. The NFIP offers insurance to properties that comply with minimum standards for floodplain management — a community-based effort to prevent or reduce flooding risk — though there are coverage limits. Supplemental private flood insurance is an option if additional coverage is needed.
 

What does flood insurance cover?

Alabama flood insurance provides financial protection for physical damage caused by flooding, but coverage differs depending on the type of property and policyholder.

For community associations (HOAs and condos), coverage may include:

• Building exteriors (roofs, walls, foundations)
   
• Shared mechanical systems (HVAC, electrical, plumbing)
   
• Common areas (hallways, lobbies, elevators)
   
• Amenities (clubhouses, gyms, pools)
   
• Permanently installed equipment servicing multiple units
   
• Detached garages or maintenance structures (subject to policy limits)

For landlords and rental property owners, coverage may include:

• The main structure (foundation, walls, floors, roofing)
   
• Essential systems (furnace, water heater, central air conditioning)
   
• Built-in appliances (dishwashers, stoves, refrigerators)
   
• Detached garages (within NFIP coverage limits)

Contents coverage can protect items like furniture and electronics, but landlords’ policies generally don’t cover tenant belongings. Likewise, HOA master policies don’t cover interior finishes or personal property, so unit owners may need separate Alabama flood insurance.
 

Know your community’s flood risk

Flood risk refers to the potential for a flood and the subsequent likelihood and severity of damage it may cause.

"Everyone lives in an area with some flood risk, whether low, medium, or high; your community’s risk depends on various factors such as its geographical location, historical data, rainfall patterns, and more. Talk to your agent and management partner about mitigation opportunities that will better protect your property and potentially save you on your premiums."

John Lee, vice president of FirstService Financial

Flood maps are popular tools for determining which areas are at risk of flooding, allowing communities to develop strategies for reducing their risk. Because flood risk changes over time, FEMA regularly works to identify and map community flood risk. Understanding your community’s flood risk is crucial to protecting lives and property values.

A property management team with experience and knowledge of your area can help your board assess your community’s vulnerabilities, sharing insight into ways to mitigate risk.
 

The cost of flood insurance is rising

Alabama flood insurance premiums continue to soar. According to FEMA's projections, some areas' premiums are expected to even double. Boards should know that premiums will continue to rise in Alabama for properties in high-risk flood areas under FEMA's updated pricing methodology. Instead of relying on old flood zone maps covering broad areas, the new methodology bases premium prices on a more comprehensive range of factors. Risk Rating 2.0 allows insurance agents to consider multiple flood risk factors when providing customized quotes. Under the previous methodology, some policyholders with lower-valued homes may have paid more than their share of the risk, while those with higher-valued homes may have paid less. The goal of Risk Rating 2.0 is to build a more accurate picture of a property's risk to determine its specific coverage needs.

Variables considered under Risk Rating 2.0 include a property's distance to flooding sources, ground elevation, the property's characteristics (building height, foundation type, building occupancy, number of floors, etc.), the property's replacement cost value, and more.

Insurance premium increases under the updated rating system are capped at 18% per year, increasing only until the full risk rate has been reached.
 

Tips to mitigate flood damage

While you can’t always stop a flood from happening, you can take steps to mitigate some physical and financial loss. Here are some preventive steps to help you protect your property:

• Apply sealants and coatings to your foundation, walls, windows, and doorways to prevent floodwater from entering.
   
• In the event that rising floodwater is close to reaching your electrical system, turn off your electricity at the breaker panel.
   
• Remove water as quickly as possible with a wet/dry vacuum.
   
• Clear out gutters and drains so that water can flow freely.
   
• Use sandbags to block any gaps that lead to flooding. If filled and placed correctly, sandbags can divert moving water around buildings instead of through them.

As a board member, being proactive in safeguarding your community against flooding threats is crucial. By investing in Alabama flood insurance, you can protect your association from financial devastation.

To learn more about Alabama flood insurance, contact FirstService Residential.