The weather’s been wild these past few years — snow in Houston, category five hurricanes, and flash floods all over the United States. While homeowners’ and renters’ insurance policies cover damage from some natural disasters, flood damage is pricey enough to require its own coverage.
Unless you have a beach house on the Gulf Coast, you might not think flood insurance is worth the extra expense. But flood insurance is surprisingly affordable and accessible, not to mention invaluable if your place does get flooded (which is more likely than you think).
What is flood insurance?
Flood insurance is a policy specifically designed to protect your home and belongings from damage caused by floods or flood-related damages, like erosion and sewer backups. Officially, a flood is defined as:
“an excess of water on land that is formally dry” — weather events like coastal storms and hurricane surges, heavy prolonged rain, melting snow in spring thaws, dam failures, overflowing rivers, flash floods, and blocked storm drainage systems all count.
Why is flood insurance necessary?
The Federal Emergency Management Agency (FEMA) reports floods are both the most common natural disaster in the United States and the most expensive for residents.
If you own a home in a high-risk flood zone, there’s about a one-in-four chance your home will flood during a 30-year mortgage — pretty high odds, which is why most mortgages or homeowners’ policies in these zones require you to hold supplemental flood insurance.
Low-risk regions aren’t immune to flooding damage either; FEMA estimates over 20% of their claims come from areas perceived as low risk.
But if you have homeowners’ or renters’ insurance, why tack on another policy? As you may have noticed, homeowners’ and renters’ policies don’t cover flood damage — it’s possibly the most common and frustrating exclusion.
And while FEMA does step in with federal aid after a Presidentially declared disaster, their assistance usually taps out at $5,000 grants (not nearly enough for many households to recover) or loans that must be repaid.
What does flood insurance cover?
You can purchase two kinds of flood coverage, together or separately: building coverage (for the structure of your home) and contents coverage (for your personal belongings). The policies will have separate deductibles.
The National Flood Insurance Program, which issues the majority of policies in the United States, offers building coverage up to $250,000 and contents coverage up to $100,000. Private insurance companies often have much higher limits.
Building coverage
This insurance covers replacement costs for flood damage to the physical structure of your home, including:
- The foundation and flooring.
- Electrical and plumbing systems.
- Central air and heating systems (furnaces, HVAC units).
- Appliances (refrigerators, stoves, dishwashers).
- Carpeting, flooring, and paneling (permanently installed).
- Debris removal.
- Attached furniture (paneling, bookcases, cabinets).
- Detached structures like garages or sheds (for up to 10% of your coverage limit).
Personal contents coverage
Personal contents include your belongings in the home, such as:
- Furniture.
- Clothing.
- Electronic appliances.
- Refrigerators, freezers, and the food inside them.
- Curtains and window treatments.
- Portable air conditioners.
- Carpets that aren’t permanently installed.
- Valuable items like artwork (up to $2,500).
The payout is usually on a cash-value basis, which accounts for depreciation (as opposed to replacement costs).
Renters typically only need personal contents coverage, since structural coverage is handled by the landlord or building owner.
Commercial flood insurance
Business owners who operate out of a building can get commercial flood insurance through the NFIP or any private carriers that offer it.
Commercial flood coverage has a high limit — up to $500,000 each for the building and contents, including any equipment and inventory you’re storing.
What doesn’t flood insurance cover?
You might be surprised (I was) by the limitations to flood insurance coverage — most policies exclude any water damage that isn’t caused by a flood. Some of the exclusions are covered under a standard homeowners’ or renters’ insurance policy; others may require supplemental coverage or riders.
- Internal water damage, like sewer backups and burst pipes, isn’t covered unless the damage was directly caused by flooding. Homeowners’ policies may offer a water backup coverage rider instead.
- Basement damage or damage to below-ground rooms. This is a tricky one since some appliances in a basement (washers, dryers, furnaces) will be covered by building or contents coverage. But flood insurance won’t pay for cosmetic repairs to a finished basement — like replacement costs for new carpeting or sinks — or for personal belongings stored there, though they may provide some coverage to dry out a flooded basement.
- Mold, mildew, and moisture buildup that could have been prevented by the homeowner (think accumulated damage, not damage that formed right after a flood). Most homeowners’ policies won’t cover this type of damage either.
- Cars and other vehicles. Car damages typically fall under the umbrella of auto insurance.
- Currency, stock certificates, and other metal and paper valuables exceeding contents coverage will also not be covered.
When does flood insurance take effect?
The standard for NFIP policies is a 30-day waiting period after purchase before coverage kicks in. This means you should think about flood insurance well before a storm is on the radar.
In some cases, you can get covered more quickly. If you take out a flood insurance policy along with your mortgage, it may kick in immediately. And if you’re renewing a policy and adding extra coverage, you won’t have to wait 30 days.
If you go with a private insurer, the waiting period may be shorter — typically around 15 days instead of 30.
Who needs flood insurance?
People in Special Flood Hazard Areas (SFHAs)
The federal government keeps an updated map of Special Flood Hazard Areas (SFHAs) or high-risk flood zones. The FEMA search engine identifies these zones if you enter your address or city name — the maps can be difficult to read at first, but they should give you a visual guide to any floodplains in your area.
If you’re in the home-buying process, most federally insured mortgage lenders require homeowners living in “flood zones” to get either federal or private flood insurance. Often (but not always) cities and towns in high-risk flood regions participate in the National Flood Insurance Program (NFIP), allowing residents to purchase insurance from this program.
People living in or near coastal areas
This includes the Gulf and Atlantic coasts, even if you’re not technically in a hazardous zone. 2017’s Hurricane Harvey damaged plenty of homes in moderate-to-low-risk areas.
Residents in newly developed areas, in regions prone to wildfires, or in floodplains (low-lying areas near rivers) are also especially vulnerable to floods. The Insurance Information Institute estimates a home in a floodplain is five times more likely to face flooding than fire.
People in moderate-to-low-risk flood areas
Just because you’re not living in coastal Texas or New Orleans doesn’t mean you’re safe from floods. Climate change is ongoing, and because heavy rainfall and other changing conditions aren’t always reflected in FEMA’s flood zone map, the map tends to underestimate flood risk. And your lender can still require it, regardless of your area’s risk level.
On the plus side, residents of moderate-to-low-risk flood zones usually qualify for much lower insurance rates, known as Preferred Risk Policies. You could get NFIP flood insurance for as little as $150 a year; compared to the average annual NFIP policy cost of $700, this is a huge bargain for the same level of coverage.
Renters
Your landlord should have flood insurance that covers the building (ask if you’re not sure). Renters are only responsible for covering their personal belongings, or “contents-only” coverage, which is less expensive than full flood insurance. Prices for NFIP contents-only policies start at $99 a year.
This is similar to the way renters’ insurance protects your personal property from other potential damages, like fire or theft. But like homeowners’ insurance, renters’ insurance stops short of covering flood damage.
How much does flood insurance cost?
Your price will vary based on property risk and the coverage amount you select. Property risk takes several factors into account besides your location: your home’s age, building style, other features (you’ll pay more if your home has a basement), and elevation level above your area’s Base Flood Elevation or BFE.
NFIP flood insurance rates are determined by the government, so you’ll pay the same rate regardless of the carrier. Private insurance policy costs, on the other hand, might be slightly different with each insurance company.
According to FEMA, an average NFIP policy runs between $642-$700 for about $257,000 worth of coverage (including building and contents). If you spring for the maximum NFIP coverage of $350,000, your premiums may be higher. Preferred Risk Policy premiums for lower-risk homes in lower-risk zones are cheaper, in the $200-$400 neighborhood for building and contents coverage.
The NFIP requires annual premium payments, so prepare to pay upfront; private insurers may accept monthly installments.
How much flood insurance do you need?
The ideal flood insurance amount, like homeowners’ insurance, depends on how much it costs to completely rebuild your home and replace your valuables. This means you’ll have to estimate what everything is worth, through an online calculator or a formal appraisal—if you have homeowners’ insurance you’ve already been through this process. Remember replacement costs, which account for inflation, are higher than an asset’s actual cash value (so if your insurance offers cash value reimbursements, these may not be enough to cover replacement).
Federal NFIP coverage maxes out at $350,000 regardless of the insurance carrier. This might be plenty of coverage for you, and if you don’t even need that much, you can choose a lower limit to save money.
But if you need more, you’ll have to tack on private insurance. This coverage has much higher limits, with some carriers offering as high as $5 million for dwelling coverage. Providers may allow you to supplement NFIP coverage with a stand-alone private policy or “excess flood insurance.” Be careful you aren’t buying more than you’ll actually use, either; it’s not worth the extra premiums.
How can you save money on flood insurance?
Live in a low-risk region
If you’re looking for housing, whether you’re planning to rent or own, check the flood risk in the area where you plan to live — location is the number one variable in flood policy costs.
Your risk level may be a no-brainer if you’re on the Florida coast or landlocked in Illinois, though there’s no zero-risk spot for flood damage. But if you’re househunting in a city or town where some neighborhoods have higher flood risk than others, that’s something to pay attention to.
Increase the deductible on your policy
This is probably the easiest way to drop your flood insurance costs. High deductibles make you responsible for more rebuilding costs if you do make a claim since you’ll have to pay the deductible amount before the insurance kicks in.
But high deductibles mean lower premiums, which translate to immediate savings that keep paying off in the long term. A typical policy has a $10,000 maximum deductible, which could net you up to 40% in premium savings. And you can choose different deductible amounts for building and contents coverage.
Increased deductibles aren’t ideal for every situation, though, so get input from your insurance provider first.
Flood-conscious home improvement projects
Especially in high-risk areas, you can save thousands of dollars over the years by elevating or otherwise floodproofing your home — that is, if you have the money, resources, or DIY know-how to invest in construction costs upfront.
FEMA has a handy and extensive guide to home retrofitting on their site. The government even provides some funding through hazard mitigation grants for qualifying NFIP-insured homeowners whose houses need a flood-friendly retrofit.
Elevating your home is the project most likely to reduce your costs. You want the house higher than the community’s Base Flood Elevation or BFE — the maximum height floodwaters might reach if the area floods.
The NFIP requires homeowners in high-risk areas to have an “elevation certificate” that indicates how high the home is relative to the area BFE. And private insurers sometimes offer discounts if you have an elevation certificate. This certification may be included in your homebuying paperwork (in some flood-heavy areas, they’re required at the time of construction) or it can be completed by an engineer who will survey the property for a fee.
Every foot above the BFE counts; FEMA estimates a home that’s three feet above the BFE will save its owners up to 60% in premiums. If you can’t elevate the whole building, you can often save by elevating any water heaters, electrical equipment, and air conditioners.
Another way to lower costs is to review your home’s “flood openings” or flood vents and make sure they’re up to code. If your house has a basement, which the NFIP defines as any area with a floor below the BFE on all sides — including crawlspaces — filling in any cracks in the basement foundation will help you save on costs.
Do homeowners’ insurance policies cover any flood damage?
Unfortunately, the typical homeowners’ or renters’ policy excludes flood damage (they’re pretty specific about it). What these policies do cover includes water damage from overflowing appliances or bursting pipes, or rain damage — if the water comes from the sky or within the home, it’s under the homeowners’ insurance umbrella. If the water comes from (or into contact with) the ground outside, it’s a flood insurance expense.
Some homeowners’ insurance policies let you pay to add “riders” or extra coverage for specific damages that aren’t covered otherwise, but riders rarely cover flooding.
Get homeowners insurance
You want your home protected from any potential damage, not just floods. For most new homeowners, your first step will be comprehensive homeowners’ insurance. In many cases, your homeowners’ insurance carrier will also be able to underwrite flood insurance (through the NFIP, a private policy, or both). So it’s important to choose a carrier you can trust.
You can easily shop rates and flood insurance options through Policygenius, a convenient insurance marketplace.
How to purchase flood insurance
National Flood Insurance Program (NFIP) coverage
Most flood insurance in the United States comes from the NFIP, which is available to homeowners in every state. Though the federal government administers NFIP policies, they’re sold by private insurers.
Technically your city or town needs to participate in the NFIP before you can buy NFIP coverage. A lot of towns participate; you can check for yours on FEMA’s community status list.
Even if you aren’t in one of these areas, many major homeowners’ insurance carriers offer their own version of NFIP coverage for the same amounts through the “Write Your Own” flood insurance program. See the full list of participating carriers here, or start by searching for providers in your state.
The limits are standard across the country: building coverage up to $250,000 and contents coverage up to $100,000.
Supplemental flood insurance
If you need a little more coverage than the NFIP provides, many carriers sell excess or supplemental flood insurance to fill in NFIP coverage gaps. These policies often include perks like compensation for the replacement cost of your home, and coverage for alternative living arrangements (which isn’t in a standard NFIP policy).
Private flood insurance policies
Depending on where you live, you might be required to purchase NFIP insurance before going with a private carrier. But private flood insurance can provide benefits NFIP coverage doesn’t, and for homeowners who need higher coverage limits, it might be necessary.
Hundreds of private insurers underwrite their own flood policies, and unlike NFIP coverage, these policies can vary in pricing and perks. Limits are high—typically $500,000 or higher for dwelling coverage, twice as much as the NFIP offers, and between $250,000 and $1 million for contents coverage. And while the NFIP’s contents coverage replaces personal items at cash value, some private policies will reimburse you for replacement costs instead, a much larger amount. They might also add “loss-of-use” coverage or payment for alternative living arrangements (NFIP doesn’t add this).
Waiting periods are shorter as well. A private policy often takes effect 15 days after you buy it, as opposed to the NFIP’s 30 days.
You can get a standalone flood policy, which is pricier, or see if your home or renters’ insurance carrier offers a “flood endorsement” or supplement for the policy you already have.
There’s one downside to private flood insurance: carriers can cancel your coverage or opt not to renew it at their discretion. After you make a claim, for example, they may decide your residence is too high-risk to continue coverage. The NFIP, on the other hand, isn’t allowed to cancel your policy as long as you make payments.
How do you file a flood insurance claim?
Your first step is to assemble the evidence. Take pictures of any structural or contents damage, and separate the damaged from the undamaged property as much as you can. Don’t throw anything out yet; you want as much evidence as possible for the insurer.
To make the contents coverage process go more smoothly, make a list of any damaged items, and provide as much identifying info as possible (cost, model number, warranties, receipts).
As soon as you get a chance, call or email your insurer. They require timely notification, so if you wait too long, they might decline coverage. They’ll send an insurer out to view the property, and within 60 days you’ll complete a “Proof of Loss” statement that includes an estimate of the replacement cost you need to be covered (the insurer can help you with this total if you’re not sure).
If you have NFIP coverage, you might be eligible for some grant funding to help with repairs under their Increased Cost of Compliance (ICC) coverage program.
Summary
Floods aren’t fun to anticipate, but a good insurance policy can minimize the damage no matter where you live. Check out FEMA’s NFIP website or contact your home insurer to get yourself covered, so you’ll be all set if and when a storm comes.