Guide to flood insurance: here’s what to know

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Floods are the nation’s most common natural disaster, but the devastating damage that flooding can cause is not covered under a standard homeowners, condo owners or renters insurance policy. To protect your finances from the threat of flood damage, you may want to consider purchasing a flood insurance policy.

Flood insurance is designed to cover damage that results from externally-caused flooding — flooding due to heavy rains, snowstorms, overflowing storm drains or levees, etc. Flood insurance could be more than just a smart financial move — it might be a requirement. Your mortgage lender will likely require you to have a flood insurance policy if your home is located in a flood zone.

Bankrate Insight
  • Floods are the most common natural disaster in the U.S., and just one inch of water can cause $25,000 in damage to your home.
  • A standard homeowners insurance policy does not cover damage caused by flooding.
  • Flood insurance may be required if you have a government-backed mortgage and live in a flood zone.
  • You typically have to pay a flood insurance policy premium in full when purchasing.

What is flood insurance and how does it work?

Flood insurance is a standalone insurance policy that covers your home and personal belongings from flood-related damage. Flooding is defined as an overflow of water onto land that is typically dry, but flood policies do have some exclusions. Mudslides, for example, are not typically covered by flood insurance.

Having flood insurance may be beneficial because flood-related losses are not covered under traditional homeowners, condo owners or renters insurance. Flood insurance policies are offered through the National Flood Insurance Program (NFIP) and some private insurance companies. However, a few homeowners insurance companies, such as Kin, offer flood coverage as an endorsement.

There is typically a 30-day waiting period that applies to flood insurance policies. However, this period could be waived in a few scenarios, including if you need flood insurance to close on or refinance a home and if your home has been included in a newly designated flood zone within a certain timeframe.

What does flood insurance cover?

NFIP flood insurance policies come with just two coverage types: dwelling coverage and contents coverage.

  • Dwelling coverage: This is the backbone of your flood insurance and is mandatory to purchase a policy — you cannot waive your dwelling coverage. Dwelling coverage provides financial protection from the damage that flooding can cause to the structure of your home, built-in appliances and attached structures.
  • Contents coverage: Contents coverage covers your belongings, including your clothing, furniture and home decor, up to your policy limits. This is optional coverage and you can purchase NFIP flood policies without personal property coverage.

Private insurance companies have more flexibility than the NFIP in the flood insurance coverage they can offer since the government is not paying out their claims. You may find that you can purchase different coverage or coverage in higher limits with a private carrier than you can with the NFIP. Just like with home insurance, getting quotes from a few different carriers might help you find the best flood insurance for your needs.

What is not covered under flood insurance?

Like home insurance policies, flood insurance policies have exclusions. Flood insurance will not cover damage caused by moisture, mildew or mold that could have been prevented. Damage caused by earth movement is also commonly excluded, as is damage to outdoor belongings like decks, patios and pools. Landscaping is also not covered. If you are displaced due to the damage to your home, your flood insurance policy may not include additional living expenses coverage.

Flood insurance is designed to cover damage caused by true floods. Flooding is typically defined as accumulating water on normally dry ground. Water damage caused by internal sources in a home — like failed sump pumps causing water to back up in a basement or a burst pipe causing water damage to a wall or floor — are not covered by flood insurance, but might be covered by your home insurance policy, depending on the additional coverage you have.

I have homeowners insurance. Is that enough?

Homeowners insurance and renters insurance policies may offer protection for plumbing-related flood damage and water leaks, but they will not cover losses due to naturally occurring floods. This is because flooding can be devastating to a region. Many private insurance companies are not structured to withstand the financial stress of paying out claims in such large amounts. To ensure the ability to pay flood damage claims, insurance companies would have to increase home insurance premiums significantly.

Although you may think your area is relatively safe from flooding, the Federal Emergency Management Agency (FEMA) reports that 99% of all U.S. counties had experienced a flood event between 1996 and 2019. The average NFIP claim payout for flood damage is $52,000.

Do you need flood insurance? The answer will depend on each homeowner. You might need flood insurance if:

  • Your home is in a flood zone, and you have a government-backed mortgage. Mortgage companies will likely require flood insurance in this case. It is worth noting again that flood insurance premiums are typically due in full upon purchase.
  • Your home is in a high-risk flood area. You can check your flood risk using FEMA’s mapping tool. If flooding is common or likely in your area, buying a flood insurance policy could be a good idea. Remember that there is typically a 30-day waiting period, so you probably don’t want to wait until there is a storm that could cause flooding in the forecast.
  • You do not have the finances to repair flood damage. Even if you are not in a flood zone, your property could still flood. If you do not have the finances to repair your home or replace your belongings after a flood, you might want to consider a flood insurance policy.

Types of flood insurance

Previously, the only way to purchase flood insurance was from the NFIP. However, in the last several years, some private carriers have started to offer flood insurance. When it comes to private flood insurance vs. NFIP coverage, understanding the differences between the programs could help you determine the best flood insurance companies to request quotes from. Private flood insurance isn’t constrained by government regulations and might offer more coverage options or higher limits than an NFIP policy. You may be able to get private flood insurance quotes by reaching out to local insurance agents to discuss what options are available. Getting quotes from a few private insurers and the NFIP might help you decide which option is right for you.

National Flood Insurance Program (NFIP)

The National Flood Insurance Program gives homeowners access to federally supported flood insurance. NFIP insurance is available to anyone regardless of flood risk and offers up to $250,000 in building coverage and $100,000 in contents coverage. Commercial properties can obtain up to $500,000 in building coverage and up to $500,000 for contents. These coverage types generally have separate deductibles and may need to be purchased separately.

Over 50 insurance companies write and service NFIP policies. If you are interested in buying flood insurance, you can start by asking if your home insurance provider can give you a flood insurance estimate — you might be insured with a company that can quote and sell NFIP flood insurance. You can buy coverage directly from the NFIP if your carrier does not offer this program.

Private flood insurance

Private flood insurance also covers the structure of your home and its contents from flood damage, except it receives no support from the federal government. Instead, private flood insurers are companies that either rely on a reinsurer or money collected from premiums to cover losses. So instead of the federal government underwriting your flood insurance policy, it will be underwritten by an independent company.

Private flood insurance can be more robust than NFIP policies, and you might have access to more coverage options and higher policy limits than you do with federally underwritten policies. Additionally, waiting times for private flood insurance might be shorter than the 30-day period NFIP requires.

How much does flood insurance cost?

The average annual cost of flood insurance through the NFIP was $700 in 2019. However, in October 2021, FEMA began using its Risk Rating 2.0 program, which takes various factors into account when determining premiums. The program is designed to close the price gap between lower-value and higher-value homes and more accurately rate an individual property’s risk of flood damage.

If you opt for coverage through a private insurer, rates will vary by company. In addition, the price for your flood insurance will depend on several factors, including:

  • Flood zone and flood risk
  • Home age and construction
  • Coverage limits
  • Deductible level

Flood insurance policies typically carry a paid-in-full requirement, so you should be prepared to pay your entire annual premium when you purchase the policy.

How to lower the cost of flood insurance

While flood insurance can be expensive — often more expensive than the cost of your home insurance policy — the Risk Rating 2.0 system is expected to lower the cost of flood insurance for many NFIP policyholders. Whether you have or purchase a policy from the NFIP or a private carrier, you may be able to lower your premium. Bankrate’s guide to the cost of flood insurance offers some helpful tips about how you can potentially lower your flood insurance premium.

Regardless of your area’s flood risk, flooding could happen. Flood insurance is designed to protect your finances in case of a flooding event. Having a flood insurance policy is often an integral part of your financial plan.

Frequently asked questions

What are the best flood insurance companies?

Flood insurance doesn’t vary as much as homeowners insurance does, but the best flood insurance company for you will still depend on your individual wants, needs and circumstances. Homeowners in high-risk flood zones might have different coverage needs than homeowners in lower-risk zones, for example. Additionally, some homeowners may want coverage for their personal property while others choose to forgo that option. Talking with a flood insurance agent and getting quotes from both private carriers and the NFIP could help you find a policy that is right for your situation.

How much flood insurance do I need?

Flooding can be devastating, so you should consider insuring your home to its replacement value to help protect your finances from the danger of having to pay for repairs out of pocket if possible. While you can opt out of personal property coverage, it may not be the best choice for you. The cost to repair or replace your belongings after flood damage will not be covered unless you purchase contents coverage. If you aren’t sure how much coverage to purchase, you could consider reviewing your needs with an insurance agent, who might be able to help guide your decision.

Does flood insurance cover flooded basements?

It depends on what has caused the flooding and the specifics of your policy. If your basement flooded due to a sump pump failure, flood insurance would not cover it, but your home insurance might if you have a water backup endorsement. The NFIP prohibits and excludes basements in new construction in high-risk areas. Because basements are at a higher risk for severe flood damage, you should talk to your agent and read your policy carefully to determine coverage.

Written by
Cate Deventer
Insurance Writer & Editor
Cate Deventer is a writer, editor and insurance professional with over a decade of experience in the insurance industry as a licensed insurance agent.
Edited by
Insurance Editor