Flood insurance provides financial protection if a flood damages your home or other real estate property. You may already have homeowners insurance, but a standard homeowners policy doesn’t cover flood damage.
The two primary sources of flood insurance are the National Flood Insurance Program (NFIP) and private flood insurance companies.
Here’s what you should know about how flood insurance works, what it covers, where to buy it, and how much it costs.
Flood insurance helps cover the cost of repairing and replacing your home and belongings after flood damage. Floods can be the result of heavy rains, storm surges, melting snow, or a dam failure. Standard homeowners insurance policies typically don’t cover flood damage, leaving you, as the property owner, vulnerable to substantial financial losses.
Around 14.6 million properties in the U.S. are at immediate risk of flooding, according to a flood database developed by the First Street Foundation, a non-profit research and technology organization.1 The organization expects that figure to reach 16.2 million by 2050 because of climate change.
Despite this high risk, only about 4% of homeowners nationwide have flood insurance.2
Flood insurance operates similarly to other types of insurance. You purchase flood insurance, either through the National Flood Insurance Program (NFIP) or a private flood insurer. Your policy outlines the coverage limits and terms.
If a covered flooding event damages your home or property, you file a claim with your insurance company. This involves documenting the damage and providing the necessary information to support your claim.
The insurance company will review your claim. If it approves the claim, your insurance company will pay for the covered damages to help you repair or replace your property.
If the insurer denies your claim, it should provide a reason based on the policy terms.
Flood insurance covers a range of items and structures, depending on the specific terms of your policy. Here’s a breakdown of what flood insurance through the NFIP typically covers:
The building structure, including electrical and plumbing systems, furnaces, and water heaters
Flooring
Cabinets, paneling, and built-in bookcases
Detached garages
Fuel tanks, well-water tanks and pumps, and solar energy equipment
Your personal belongings, like clothes, furniture, and electronics
Appliances
Valuable items like artwork and furs (up to $2,500)3
Flood insurance through the NFIP doesn’t cover:
Temporary housing and additional living expenses while your home is being repaired or is uninhabitable
Property outside of the home, like landscaping, septic systems, decks and patios, fences, hot tubs, and swimming pools
Financial losses from business interruption
Currency, stock certificates, precious metals, and other valuable papers
Cars and other vehicles
Personal property kept in your basement
You may have other insurance policies that cover some of these exclusions. For example, if a flood damages your car, you might have coverage under your car insurance policy’s comprehensive coverage.
You can buy flood insurance through two primary sources: the National Flood Insurance Program or a private insurance company that offers flood policies. Here’s a closer look at the offerings available from each.
Congress established the NFIP in 1968 to reduce the financial impact of flooding and encourage communities to adopt and enforce floodplain management regulations.
The Federal Emergency Management Agency (FEMA) oversees the program, providing coverage for property owners, renters, and businesses in participating communities.
While the NFIP itself is a government program, policies are sold through nationally recognized insurance companies. When policyholders file claims, NFIP-backed insurance companies must pay the total amount they’re entitled to under the policy’s terms.4
Private flood insurance is an alternative to NFIP coverage. Private insurance companies offer it to provide more options and flexibility for property owners who might need higher coverage limits or broader coverage than what’s available through the NFIP.
State insurance departments regulate private flood insurance policies to ensure they meet state-specific standards and requirements. When a policyholder files a claim, the insurance company reviews and, upon approval, pays the claim according to the policy terms.
You can buy flood insurance through the NFIP or a private insurance company through your home insurance agent.
The cost of flood insurance varies depending on the type of policy you buy, your location, and the specific property’s details.
Nationwide, flood insurance for single-family homes through the NFIP averages $786 per year. Prices for policies through private insurers can vary dramatically due to the differences in the criteria listed above. If you live in a low-risk area, you could pay more affordable rates, while insurers could refuse you coverage if you live in a high-risk area.
You may also be able to tie insurer-related discounts into a policy from a private company.
Some of the factors that affect your flood insurance rates include:
Baton Rouge, LA, Tampa, FL, and Wilmington, NC have some of the highest flood risks in the U.S. The table below shows the average annual homeowners insurance rates in these cities.
Here’s some additional information about flood insurance to help you better understand your options when shopping for a policy.
NFIP policies have a 30-day waiting period before coverage starts. Private insurance companies may offer shorter waiting periods. Read your policy carefully to understand the applicable deadlines.
If you live in a high-risk flood zone, your mortgage company may require you to buy flood insurance. Coverage in other areas is optional but recommended.
Homeowners insurance covers damage to your home and its contents from events like fire and theft, but it doesn’t cover flood damage. Flood insurance specifically covers damage to your home and belongings caused by flooding.
More than 5.1 million flood insurance policies are currently in force.5 But flood policies through the NFIP have coverage caps. The maximum limit for residential structures with one to four living units is $250,000 in building coverage and $100,000 in contents coverage. If you need higher limits, you may need to purchase flood insurance through a private insurance company.
Flood insurance isn’t required if you don’t have a mortgage. But it’s a good idea because it helps protect your property and assets from the financial impact of flood damage — especially if you live in a flood-prone area.
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