FEMA says 99% of the counties across the US were impacted by floods between 1996 and 2019.
Forbes Advisor "Guide to Flood Insurance" did the heavy-lifting on this story. This is what you need to know:
A flood insurance policy covers your house and your belongings for flood-related damage. It’s separate from a homeowners insurance policy, which usually doesn’t cover flood damage from problems like hurricanes and torrential rain.
The majority of homeowners who buy flood insurance buy it from the National Flood Insurance Program, but you may be able to buy a policy in the private market.
Flood insurance can cover problems such as:
- Storm surges
- Inland flooding, such as rivers and streams overflowing during a storm
- Flash floods
Flood insurance through the NFIP has a 30-day waiting period before coverage goes into effect, meaning you can’t make a flood insurance claim for damage that occurred during the waiting period. Some private flood insurance companies have a shorter or no waiting period. For example, Zurich Residential Flood Insurance does not have a waiting period.
If your house and belongings are damaged or destroyed by a flood, you can file a claim with your flood insurance company and be covered up to your policy’s limit. For example, if you had an NFIP policy with $250,000 in building coverage, you would be covered up to that amount. Some homeowners purchase private flood insurance as an “excess” policy to provide additional coverage on top of their base NFIP policies.
What Does Flood Insurance Cover?
Flood insurance can generally be broken into two main parts: Dwelling (your house) and contents (your belongings). You may be able to purchase a building-only policy, a contents-only policy or both, depending on where you purchase your flood insurance from.
Dwelling coverage
Dwelling coverage, also called building coverage, pays to repair or rebuild your house after flood-related damage. For example, if flood water damages your electrical and plumbing systems, the dwelling coverage in a flood insurance policy would pay to repair or replace it.
Flood insurance through the NFIP caps dwelling coverage to $250,000. You may be able to buy higher amounts of dwelling coverage in the private market. For example, Flood Guard sells policies with up to $5 million in dwelling coverage and Neptune Flood Insurance offers up to $4 million in dwelling coverage.
Contents coverage
Contents coverage, also called personal property coverage, covers your personal belongings, such as furniture, clothing and appliances. For example, if flood waters destroy your living room furniture, the contents coverage within a flood insurance policy would pay to repair or replace the items.
Pro Tip
Unlike homeowners insurance, flood insurance doesn’t provide additional living expenses coverage. A standard home insurance helps pay for lodging and extra costs like meals if you need to live elsewhere after a problem covered by your policy.
An NFIP flood insurance policy caps contents coverage to $100,000. You may be able to buy higher contents coverage through the private market. For example, you can buy up to $1 million in contents coverage from Flood Guard and Florida Peninsula Insurance Co.
FEMA Flood Insurance Basics for Residential Properties
What Doesn’t Flood Insurance Cover?
Flood insurance doesn’t cover every type of water damage. A flood policy from the NFIP typically does not cover:
- Damage caused by burst pipes (that type of damage is covered under home insurance)
- Personal property outside of your building such as decks, patios, swimming pools, septic systems and landscaping
- Preventable mold and mildew
- Additional living expenses, such as hotel lodging, if your home is inhabitable
- Damaged cars (the comprehensive portion of your car insurance policy covers flood-related car damage)
Do I Need Flood Insurance?
Flood damage is not covered by standard homeowners insurance, so if you’re concerned about flooding you should look into flood insurance.
A Swiss Re survey exposes a common mistake among homeowners: 43% believe their home insurance policy will cover them for flood damage.
Homeowners insurance for water damage is generally limited to problems like burst pipes—not an inundation of water on the ground.
In some cases, you may be required to have flood insurance. For example, if you own a home or business and have a government-backed mortgage, you’ll be required to have flood insurance if you live in a high-risk flood area.
The price of flood insurance can turn off many homeowners who aren’t required to have it. But having a flood insurance policy can provide immediate financial assistance so that you don’t have to wipe out your savings or take out a loan in order to rebuild.
Relying on federal disaster aid after a flood isn’t a good financial plan. Disaster aid can take many months, and isn’t offered after every flood. Disaster victims who don’t have insurance often rely on funds from the Disaster Loan Program of the Small Business Administration (SBA).
SBA loans can provide up to $200,000 for homeowners to repair their primary residences. In addition, homeowners and renters can receive up to $40,000 to repair personal property (such as furniture) or replace it. You’re expected to pay the loan back, although they have low interest rates and can have long terms, such as 30 years.
How to Get Flood Insurance
There are two ways to get flood insurance:
- The National Flood Insurance Program (NFIP) is the federal plan from FEMA. Most homeowners who have flood insurance get it from the National Flood Insurance Program. Your home insurance agent can process your application for a policy.
- Private personal flood insurance is available from some companies. They may have coverage options not available from FEMA so they can be good for people who have large or expensive properties, or who simply find the FEMA choices to be insufficient.
The NFIP is required to take all applicants who live in communities that participate in the NFIP. Private insurers can be selective in who they sell to. Ultimately, if your property has had past flood damage or you live in a high-tide flood area, your choice will likely be limited to a FEMA policy.
When Should I Buy Flood Insurance?
If you live in a high-risk flood zone and have a mortgage, your lender may require that you have flood insurance, but coverage may be a smart choice even if you live in a low- or moderate-risk flood zone.
Homes outside of high-risk zones are still at risk of flooding. FEMA says that one-third of flood insurance claims are from low- or moderate-risk flood areas. Flood insurance costs are lower if your property has low flood risk.
How Much Flood Insurance Do I Need?
FEMA flood insurance policies have set coverage limits, but if you feel you need more coverage, you can buy a private flood insurance policy as a supplement.
Maybe the cost to rebuild your home is more than $250,000, which is the FEMA policy limit. Or you may need more than $100,000 in contents coverage.
In those cases, check with private flood insurance companies and buy coverage that goes beyond FEMA flood policies.
How Much Does Flood Insurance Cost?
Flood insurance costs an average of $859 a year from the National Flood Insurance Program (NFIP), according to Forbes Advisor’s analysis of flood insurance rates.
In Texas the average dwelling insurance amount is $196,264, the average contents insurance amount is $603.
photo: Getty Images