Updated June 4, 2021
Reading time: 5 minutes
Some homeowners are required to purchase flood insurance in addition to their traditional homeowners insurance depending on their geographic location, especially when they reside in a marked flood zone.
Did you know that floods are the single most common natural disaster in the United States?
In fact, 90 percent of all the nation’s natural disasters include flooding. Yet the typical homeowners insurance or renters insurance policy doesn’t include flood coverage. That’s why it can be a good idea to purchase flood insurance, regardless of whether you live in a high-risk flood zone.
Insurify can help you find the right homeowners insurance package for your needs and budget. Compare homeowners quotes from several American companies—and even unlock discounts—before you even start thinking about flood insurance.
Flood insurance covers property owners’ personal property and possessions for direct physical losses caused by flood-related problems—not just storm-related floods but also floods caused by things like dam failures. To qualify as a flood for insurance purposes, the water must cover at least two acres or affect at least two different properties; only in these cases can you make a flood insurance claim. Flood insurance policies can also cover damage caused to personal items and appliances that suffered water damage. Coverage can also cover living expenses like hotel bills and meals if you’re forced out of your property after a flood. Private flood insurance is an excellent option for homeowners in demarcated flood zones.
The typical flood insurance policy covers up to $250,000 of physical damage to the home and up to $100,000 for the personal possessions inside the home. However, be aware that while the home coverage is calculated on a replacement cost basis, the personal possession coverage is calculated on an actual cost value basis.
Replacement cost means that the insurance policy will pay to rebuild or replace the structure to the same condition it was in before the flood, even if that’s more than the building was presently worth. Actual cost value, on the other hand, means the policy will only cover personal possessions up to their actual value at the time of the flood. For example, if your carpeting is destroyed by flooding caused by heavy rain, the replacement cost will cover a new one.
Flood insurance policies also have deductibles, which is the amount you’re responsible for covering before the flood policy kicks in. The lower your deductible, the higher your premiums for the insurance will be. If your mortgage lender requires you to get flood insurance, they may also set a deductible requirement.
Residents in states like Florida and Texas are no strangers to water damage and the destruction floodwaters cause after storms and hurricanes. Policyholders of flood insurance have the peace of mind that they are covered from flood damage even when their other insurance providers’ coverage falls flat after a flood.
MORE ON FLOOD INSURANCE
For hyper-local information on your flood insurance options, check out our state guides for Louisiana flood insurance, Massachusetts flood insurance, Texas flood insurance, California flood insurance, and Florida flood insurance.
Until recently, the National Flood Insurance Program (NFIP) through FEMA—the Federal Emergency Management Agency—was the only source of flood insurance coverage. It’s now possible to buy comparable flood insurance coverage from private insurance companies in a few states. The main benefit of buying from a private insurance company as opposed to the federal government is that you can set higher coverage limits than the $250,000/$100,000 coverage level supported by the NFIP.
Individuals can’t buy insurance directly from the NFIP; you’ll need to go through a participating insurance agent to get a policy. If you choose to get flood insurance from a private insurance company, you can likely do so either through an insurance agent or directly from the company.
Be aware that there’s a waiting period between the day you buy the policy and the day coverage actually kicks in. NFIP policies always have a 30-day waiting period. Private insurance companies usually have a shorter, 14-day waiting period, but confirm this with the insurer before you buy the policy. (To learn more about the NFIP, visit www.floodsmart.gov.)
The average annual cost of an NFIP policy is about $700 per year, but the price of your own flood insurance policy will vary depending on where your home is located and a few other factors.
FEMA will set your flood insurance premiums based on whether you’re in a designated flood zone. You can still get flood insurance coverage if you’re outside of a flood zone, and your premiums will be considerably lower. Other factors that may affect your flood insurance premiums include your home’s age, its size, and how many occupants it has.
FEMA is currently redesigning its flood insurance system to consider flood risk factors other than community location, such as local levels of hurricane rainfall and distance to the nearest large body of water. The agency will announce its new rates in April 2020, and they’ll go into effect starting in October 2020. The changes are expected to increase rates for more valuable homes and those in the highest risk areas while decreasing rates for homes with a low risk of flooding.
Some cities and towns have joined FEMA’s Community Rating System, which means they’ve agreed to go above and beyond the agency’s minimum standards for communities located in floodplains. If your home is located in a community that’s a member of the CRS, you’ll likely be eligible for a discount on your flood insurance premiums.
Certain alterations that can protect your home from flood damage may also reduce your flood insurance premiums.
The most significant (and expensive) way to protect your home from floods is to have it elevated above the “base flood elevation,” which is the expected flood level for your area. You’ll also need to elevate machinery such as electrical and air conditioning equipment above that base flood elevation line.
Another option is to have your foundation retrofitted with enough flood vents to meet FEMA’s floodplain requirements.
Finally, homes that are located in a floodplain and have basements or subgrade crawlspaces will be hit with as much as a 20% increase on their flood insurance premiums; thus, removing such a crawlspace can help significantly with flood insurance rates.
Some homeowners are required by their mortgage lenders to acquire flood insurance if their home falls in a high-risk flood area, generally near bodies of water. FEMA requires lenders to mandate flood insurance requirements for homeowners in these zones. You will be informed of whether or not you need to obtain a supplemental flood insurance plan prior to securing your mortgage. You can also reference flood zone maps to see if your property falls in a red zone.
Yes. Flood insurance policies are sold as supplemental add-ons to standard homeowners insurance policies. Since standard home insurance policies generally do not cover damages from floods, flood insurance offers separate protections to homeowners.
The national average cost for a flood insurance policy is around $700 annually, but depending on your property's unique flood risk prices may fluctuate. The National Flood Insurance Program is a federal program which offers flood coverage at market rates to eligible homeowners.
Wendy Connick is the founder and owner of Connick Financial Solutions, a provider of tax and bookkeeping services and a QuickBooks Online Certified ProAdvisor. A long-time freelance writer, she specializes in business and finance articles on subjects including taxes, investing, and retirement. Wendy is an Enrolled Agent (EA), the only federally licensed tax practitioners who specialize in taxation and have unlimited rights to represent taxpayers before the IRS. She is a member of the National Association of Enrolled Agents and a certified volunteer for VITA (Volunteer Income Tax Assistance), an IRS-sponsored program to provide free tax help for low-income individuals and families.Learn More