You might need flood insurance depending on where you live and what type of mortgage you have. And flood insurance could make sense even if you don’t meet specific risk criteria.
Lindsay is a freelance personal finance writer currently pursuing her Series 65 license. She enjoys helping readers learn money management skills that improve their lives.
7+ years in business and financial services content
Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.
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Floods are among the most common natural disasters, yet many homeowners are surprised to find out — often too late — that standard homeowners insurance policies don’t cover flood damage.[1][2] That’s where stand-alone flood insurance comes in, but it doesn’t work exactly like homeowners insurance policies you may be familiar with.
The federal government underwrites most flood insurance through the National Flood Insurance Program, but an NFIP policy may not be available or sufficient for everyone. Private insurers also sell flood insurance, which has its pros and cons. Your lender may even require you to get flood coverage, depending on certain factors.
As you can see, there’s a lot to consider, and this guide can help you determine if flood insurance makes sense for you.
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What is flood insurance?
Homeowners and renters insurance policies don’t cover damage from all types of natural disasters, particularly earthquakes and floods. Floods — defined as “an excess water on land that is normally dry” — stem from more than just rainstorms. Burst water mains, nearby construction, rapid snow melt, and other culprits can cause flooding, even if you live in a dry area.[3]
Flooding is an expensive natural disaster, too, with just 1 inch of water potentially causing $25,000 in damages.[4] That’s why many mortgage lenders require you to buy flood insurance if you live in a high-risk flood area or are exposed to other risk factors. Even if you don’t live in a flood zone, it can be a good idea to consider flood insurance.
Most homeowners buy flood insurance from the NFIP, either through an insurance broker or directly from the federal government. You can also buy flood insurance from private insurance companies.
The best route for you depends on a number of factors, such as the value of your home and how active your community is in reducing its overall flood risk.
You should also know other important things about flood insurance, such as how to lower your rate and how to make sure you understand your policy terms in case you ever have to file flood insurance claims.
Good to Know
Flooding causes an average of $5 billion in damages every year in the U.S. and can happen in all 50 states, Washington, D.C., and all U.S. territories, according to the NOAA National Severe Storms Laboratory.
Determining your need for flood insurance
Figuring out whether you need flood insurance starts with assessing your risks. You can check the flood risk in your area by looking at FEMA flood maps. But remember, not all water damage happens in flood zones. In fact, 99% of counties in the U.S. have experienced flooding since 1996, according to FEMA.[5] Make sure you consider other potential risks, too, such as broken water mains, poor drainage systems, and previous flood losses.
If you decide you want flood insurance, you’ll need to figure out how much coverage you need. Experts recommend you buy a flood policy with a coverage limit matching the replacement value of your home and your personal belongings.
Keep in mind that the median home value in the U.S. is $321,000, and NFIP coverage is only available up to $250,000 for structures and $100,000 for personal belongings.[6] If your home, or the contents of your home, are worth more than that, you may need to consider additional insurance coverage.
Flood insurance is generally optional, but federal law may require it in some cases. If you live in a high-risk area and have a government-backed mortgage, such as an FHA, USDA, or VA loan, you’re generally required to purchase flood insurance as a condition of your loan. Private mortgage lenders may also require it.
Similarly, you’re generally required to have flood insurance if you’ve received government assistance after a presidential disaster declaration. This includes federal disaster assistance in the form of an interest-bearing loan from the U.S. Small Business Administration (SBA) or a federal grant from the Federal Emergency Management Agency (FEMA).
Types of flood insurance policies
You may be able to choose between NFIP flood insurance and private flood insurance, depending on where you live. Here’s a brief look at the specific offerings of each.
National Flood Insurance Program (NFIP)
NFIP policies are available to any homeowners or renters living within NFIP-participating communities. More than 23,000 participating communities are listed for specific tribal, city, and county residents.[7] You can check if your community is eligible on the NFIP website. If not, you won’t be able to purchase NFIP coverage.
The downside is that coverage limits are relatively low. The maximum coverage you can get for a single-family home structure is $250,000, with single-family home contents coverage up to $100,000. Businesses are eligible to purchase up to $500,000 in structure coverage and $500,000 for contents coverage.
Private flood insurance
Many private insurers have an arrangement with the federal government to sell NFIP policies, but they may also offer their own flood policies. Private flood insurance comes in two types: a stand-alone flood insurance policy or an excess flood insurance policy that stacks on top of an NFIP policy to offer full flood insurance protection.
Private flood insurance may be cheaper if you live in low-risk areas, but companies can also deny you if you live in high-risk flood zones. Buying a policy from the same company you get your standard homeowners coverage from can simplify your finances and offer extra discounts in some cases. It may also offer extra benefits, like reimbursement for additional living expenses.
Whether you elevate your utility services off the floor
Whether you live in a high-risk or moderate-to-low risk area
Your home’s age in years and potential for structural damage during a flood
How to lower your flood insurance costs
At first glance, it seems like there isn’t much you can do to affect your flood insurance premiums besides moving your home to a low-risk flood area. But you have a lot more options than you might think. You can:
Backfill your basement to save 15%–20%.
Elevate your home by just one foot to save 30%.
Pick the highest deductible you can afford to pay out of pocket.
Give your insurance agent an elevation certificate to see if it’ll help lower costs.
Elevate utilities, such as placing water heaters and breaker panels higher in your home.
Encourage your local officials to participate in NFIP flood planning, if they don’t already.
Flooding is nature’s most common natural disaster. Don’t wait until flood events head your way — here’s some quick information so you can take action now and make sure your family is fully protected.
Do you need flood insurance if you live in a low-risk flood zone?
Not necessarily. As long as your lender doesn’t require it, you don’t need flood insurance in lower-risk areas. It’s wise to consider, though, since 40% of NFIP flood insurance claims come from areas with a reduced flood risk.
How do you determine if your property is in a high-risk flood zone?
You can check FEMA maps to see if you live in a Special Flood Hazard Area, which puts you at a high flood risk. If you live in a designated flood zone, you have a 25% chance of seeing a flood during the course of a 30-year mortgage.
Does homeowners insurance cover flood damage?
Generally, no, unless it’s a small localized flood in your own home. For example, if clogged pipes cause water to back up into your home, your homeowners insurance may be able to help. But if water backs up into your home after widespread damage from a storm, you’d need to call your agent to file a claim against your flood insurance.
What is the cost of flood insurance, and how is it determined?
NFIP policyholders pay a median rate of $786 per year for flood coverage. The exact flood insurance cost varies depending on where you live, the community surrounding you, your home’s features, and more.
How can you purchase flood insurance for your property?
You can contact an agent to buy standard flood insurance policies from the government or from a private insurer. It’s best to contact your insurance agent today, since flood losses aren’t covered until 30 days from the actual date of purchase.
Lindsay VanSomeren is a freelance personal finance writer living in Suquamish, WA. Her work has appeared with FICO, Credit Karma, The Balance, and more. She enjoys helping people learn how to manage their money better so they can live the life they want.
7+ years in business and financial services content
Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.
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