Flood Insurance: Government and Private Options

In the United States, 90% of all natural disasters involve flooding, making floods the most common natural disaster, according to the Government Accountability Office.

Flood damage is typically not covered under homeowners insurance policies, but many homeowners may not realize this. FEMA estimates that about 3% of homeowners have flood insurance, yet 17% say they’ve purchased it, according to a May 2019 survey by the National Association of Insurance Commissioners (NAIC).

“This disparity perhaps reflects the common, though incorrect, assumption that homeowners insurance covers flooding," said Eric Cioppa, president of the NAIC, in a statement.

Do I need flood insurance?

Flood damage can be very expensive: The average flood insurance claim is $62,247, according to the latest data from 2016 from the Insurance Information Institute.

If FEMA designates your property is in a high-risk flood zone, your mortgage lender might require that you buy flood insurance. Even if the property is designated as low to moderate risk, your lender could still require flood insurance. Nearly 25% of flood insurance claims happen outside of high-risk zones, according to FEMA.

Some flood insurance maps are outdated, according to a report from the Congressional Budget Office. Even if you are not required to purchase flood insurance, you might want to consider getting coverage. When Hurricane Harvey hit Houston in 2017, approximately 70% of victims did not have flood insurance, according to CoreLogic, a property data and analytics company. It’s possible many residents didn’t think they needed flood insurance because they were not in a FEMA-designated flood zone.

Related: Is Your Car Insurance Hurricane Ready?

Ways to buy flood insurance

• A National Flood Insurance Program (NFIP) policy, which is not available in all areas. You can buy an NFIP policy through your home insurance agent if your community participates in the NFIP.
• Personal private flood insurance as the primary policy, meaning the main policy on your home.
• “Excess” private flood insurance in addition to an NFIP policy. This gives you supplemental coverage on top of an NFIP policy.

National Flood Insurance Program

The NFIP was created by the United States Congress in 1968 and is managed by FEMA. Most residential flood policies are sold through the NFIP. In 2016, about 5 million homeowners had flood insurance through the NFIP.

The average NFIP flood insurance cost was $656 in 2016, according to the Insurance Information Institute. Premiums can cost more depending on the property’s flood risk and value, as well as the type of coverage and deductible you choose. The NFIP caps its coverage limits at $250,000 for the building and $100,000 for contents.

Not everyone can buy flood insurance through the NFIP. It’s only available to renters, homeowners and business owners whose properties are in “NFIP-participating communities.” A home insurance agent can tell you if your community participates, or look up your community online through FEMA’s Community Status Book.

What does flood insurance cover?

Private flood insurers may offer similar coverage to the NFIP. The NFIP covers the following.

Flood insurance is typically broken down into two coverage types:

• Building property
• Personal property

What’s typically covered for the building property:

• The building itself and its foundation.
• Built-in appliances such as refrigerators, stoves and dishwashers
• Detached garages used for parking or limited storage
• Electrical systems
• Foundation walls as well as anchorage systems and staircases attached to the building
• Fuel tanks and the fuel in them
• Furnaces as well as water heaters, sump pumps and heat pumps
• Permanently installed carpeting over an unfinished floor
• Permanently installed paneling, wallboards, bookcases and cabinets
• Plumbing systems
• Window blinds

What’s typically covered for personal property:

• Appliances such as clothes washers and dryers
• Carpeting installed over wood floors
• Curtains
• Food freezers and the food in them
• Personal items such as clothing, furniture and electronics
• Portable and window air conditioners
• Valuables like artwork and furs

Generally, the following items are not covered, although private flood insurance may offer exceptions:

• Belongings stored in the basement
• Currency, precious metals and valuable papers such as stock certificates
• Damage caused by earth movement, even if the earth movement is caused by a flood
• Damage from mold, mildew or moisture that could have been avoided by the property owner or not caused by the flood
• Additional living expenses if you can’t live at home due to flood damage
• Property outside the building such as decks, fences, septic systems swimming pools, seawalls, trees and walkways
• Most self-propelled vehicles, such as cars. (However, comprehensive insurance covers flood damage to vehicles.)

Here’s more about NFIP coverage from FEMA.

Private flood insurance

You may be able to buy private flood insurance as an alternative to the NFIP, or if you can’t buy an NFIP policy.

Private flood insurance is not backed by the federal government. In some cases, private insurers can offer broader coverage and/or cheaper rates than the NFIP.

Private flood insurance comes in two forms:

• Personal flood insurance as a base policy. This would be your primary flood insurance policy and you wouldn’t need NFIP flood insurance.
• Excess flood insurance, which is supplemental to NFIP flood insurance. You must have an NFIP policy as the base policy. If there’s a flood, you would first make a claim on your NFIP policy. If it doesn’t cover everything, you’d then tap the excess flood policy.

Even if your homeowners insurance company doesn’t sell its own excess flood insurance, it may be able to sell you an NFIP policy and an excess policy from someone else.

Some providers of personal private flood insurance

What to know about private flood insurance

• With private flood insurance, you can typically buy higher coverage limits than an NFIP policy. You may be able to purchase up to $5 million for the structure and $1 million for contents, depending on the insurer.
• The waiting period for private flood insurance can be less than the typical 30-day waiting period an NFIP policy. With some insurers, there may be no waiting period.
• Private flood insurers may offer loss of use coverage, which pays extra expenses such as a hotel bill if you can’t live at home due to flooding.

Flood insurance cost

If you drop NFIP coverage, you could pay a higher premium if you later decide you want to switch back to an NFIP policy. Some properties are “grandfathered” in to lower rates, but you must maintain continuous coverage through the NFIP to keep the grandfathered rates.

If you take steps to lower your property’s flood risk, you may get cheaper flood insurance rates. Check with your insurance agent to see if any of these projects will lead to lower flood insurance cost.

Retrofit your home:

• Elevation: Raising the home's lowest floor to at or above flood level.
• Relocation: Moving the home to higher ground.
• Demolition: Tearing down damaged property and rebuilding on the same property or elsewhere; if you rebuild in the same location, the house may need to be elevated.
• Wet floodproofing: Making parts of the home water-resistant.
• Dry floodproofing: Sealing the home to prevent water from entering.
• Barrier systems: Building flood walls or levees.