Do You Need Flood Insurance?

Get the lowdown on what’s probably the most misunderstood type of homeowners insurance.

Written by Moira Alexander / February 4, 2022

Quick Bites

  • Approximately 14.6 million U.S. homes are at risk of flooding.
  • Standard homeowners and renters insurance policies do not usually cover damage from flooding.
  • If you live in a designated flood zone, you may be required to have flood insurance.
  • Maximum coverage limits with FEMA’s federal insurance program vs. private insurers can differ significantly.

There often seems to be misconceptions about flood insurance: Oh, my homeowners insurance will cover it. I only need flood insurance if I’m in a high-risk flood zone. Minor flooding or a burst pipe won’t cause a lot of damage, right?

While the degree of damage from flooding varies depending on the situation, you don’t want to wait until something happens to decide if you should get flood insurance.

“Floods are the most common natural disaster in the United States,” says Chris Greene, founder of The Flood Insurance Guru. About 90% of all U.S. natural disasters involve floods. And damage doesn’t have to be catastrophic: Only one inch of water can cause as much as $25,000 in damage to a home, with the average home insurance claim for water damage being $11,098. Flooding from hurricanes, snowmelts, mudflows or rivers causes billions in losses each year.[1]

Around 14.6 million U.S. homes are at risk of flooding.[2] And homeowners and renters insurance do not cover damage from flooding. If you live in a designated flood zone and have a government-backed mortgage, you will be required to have flood insurance. If you live outside of a flood zone or high-risk area, flood insurance is not federally required. But your lender may still require you to have it.

Understanding the essential details about flood insurance and what your options are can help you make an informed decision concerning your property.

Inside this article

  1. Flood risk for your home
  2. NFIP vs. private insurance
  3. NFIP insurance
  4. Private flood insurance
  5. What’s the cost?

Could your home be prone to flooding?

The first step in understanding if you need flood insurance is to figure out how at-risk your home is for flooding. Check the Federal Emergency Management Agency (FEMA)’s Flood Map Service Center to find what flood zone your home is in. Simply enter any address, location or longitude/latitude coordinates and click “search.” If you find you live in a high-risk zone, it’s probably a good idea to have flood insurance.

Flood insurance can be obtained from the National Flood Insurance Program (NFIP), run by FEMA, which has more than 50 NFIP-authorized insurance companies that are searchable on its website. You can also purchase flood insurance from a private insurer.

Even if you’re at minimal risk, based on information on the map, it doesn’t mean you’ll never need flood insurance. According to FEMA, everyone lives in an area with some flood risk. Natural disasters can happen anytime and anywhere, and flooding from them can cause damage to your home. In fact, in the past five years, almost 40% of NFIP flood insurance claims came from outside the high-risk zones.[3]

Tip: Flood zone maps are continually updated, so be sure to check the FEMA Flood Map Service Center for geographical updates and any new information.

What’s the difference between NFIP and private flood insurance?

Knowing the differences between NFIP and private flood insurance coverages and rates before you choose is essential.

NFIP is available to any homeowner or business in one of the 23,000 participating NFIP communities. The main difference between NFIP insurance and private flood insurance is that the NFID program is backed by the federal government and private flood insurers are independent.

With NFID there isn’t much room for policy coverage customization and there are no competitive rate options, since the policy structure is set by the government. Private flood insurance, meanwhile, is not limited in the way NFID insurance is.[4]

“Private flood [can] cost significantly [less] with more flexible coverage compared to federal flood insurance,” says Greene. “There’s also a shorter waiting period and private flood insurance can be a better option when it comes to building coverage and contents coverage.”

Most of the private flood insurance companies typically offer additional coverages for things like replacement costs, additional living expenses or loss of use.

That said, private insurance has some drawbacks compared to NFIP policies. For instance, your premiums could drastically increase, or your policy could be canceled altogether, neither of which are issues with NFIP insurance.[5]

National Flood Insurance Program (NFIP) insurance

What it covers

Your standard homeowners policy likely covers water damage due to things like broken pipes or valve leaks, but usually not flood coverage as a result of a body of water rising or coming in from outside of your home. The NFIP covers direct physical structures and contents in case of flooding. Here’s a look at the breakdown of what’s covered under the NFIP.[6]

Structural:

  • Electrical and plumbing systems

  • Furnaces and water heaters

  • Permanently installed carpeting

  • Permanently installed cabinets, paneling and bookcases

  • Foundation walls, anchorage systems and staircases

  • Detached garages and more

Contents:

  • Personal belongings such as clothing, furniture and electronic equipment

  • Curtains

  • Washers and dryers

  • Refrigerators, cooking stoves and built-in appliances like dishwashers

  • Portable and window air conditioners

  • Microwave ovens and much more

What NFIP doesn’t cover

The cause of your flood damage is a primary factor in whether or not you will be covered. For example: If there’s damage caused by a sewer backup, flood insurance would only cover the damage if the backup was a direct result of flooding. Here are some of the situations not covered by NFIP.[6]

  • Temporary housing and additional living expenses incurred while the building is being repaired or is unable to be occupied

  • Property outside of an insured building such as landscaping, wells, septic systems, decks and patios, fences, seawalls, hot tubs and swimming pools

  • Financial losses due to business interruption

  • Currency, precious metals, stock certificates and other valuable papers

  • Cars and most self-propelled vehicles, including their parts

  • Personal property kept in basements

NFIP maximum coverage limits

There are different types of policies, depending on if you are a homeowner, renter or business owner. For example, if you’re a homeowner, maximum coverage limits are $250,000 for the building and $100,000 for the building’s contents. For renters, the maximum coverage is $100,000 for contents-only coverage. And for business owners, it’s $500,000 for the building and $500,000 for the building’s contents.

Private flood insurance

What it covers

Private flood insurance is a flood insurance policy that is issued through a private flood insurance company instead of the NFIP. It can be difficult to know what is and isn’t covered with private insurers without reading the fine print. But policies are more customizable than NFIP coverage. So in addition to NFIP coverage above, private flood insurance may also offer coverage for[4]:

  • Additional living expenses

  • Pool repair and fill

  • Business income coverage

  • Enhanced coverage for detached structures

  • Private insurance maximum coverage limits

Compared to NFIP, private flood insurance maximums can be higher, and go up into the millions for building coverage, and contents coverage can be much higher than $100,000.

Ask your insurance agent questions before you sign your policy so that you’re prepared before a flood happens. You can also review FEMA’s Flood Insurance Manual for more details.

Tip: When deciding if you need flood insurance, make sure to go over every detail of your standard homeowners insurance and NFIP flood insurance; there are many limitations around what’s covered and not covered.

How much does flood insurance cost?

NFIP costs

It’s estimated the average cost for homeowners is $738 per year through the NFIP, but this can vary by state. If you live in an area prone to flooding, you most likely will pay more for your insurance—closer to an average of $1,167 through the NFIP program, plus the cost of your standard homeowners insurance.

Here’s a list of average flood NFIP insurance costs annually for states with some of the highest and lowest rates.[7]

States with the highest average rates:

  • Connecticut: $1,198

  • Maine: $1,065

  • Hawaii: $1,033

  • Rhode Island: $1,001

  • New Mexico: $974

States with the lowest average rates:

  • Texas: $643

  • Oklahoma: $646

  • Louisiana: $656

  • Utah: $667

  • Arizona: $680

If you live in one of the 23,000 NFIP-participating communities, you can purchase NFIP flood insurance—and you may receive a discount. NFIP communities agree to adopt and implement local floodplain management regulations, aiming to protect lives and reduce the risk of future flooding. Depending on the measures a community takes, the NFIP offers discounts of anywhere from 5% to 45% off premiums.[8] You may also get a discount depending on the following factors of your home and policy:

  • If your home is in a flood zone and associated with flood risk

  • The type of coverage (building, contents …)

  • Your deductible

  • Your home’s location

  • The design and age of your house

Private insurance costs

Private insurers will take into account factors like your overall risk of flooding and flood frequency, the history of flood damage and flood loss on the property, mitigation projects made on the property, the state and zone you live in and other factors when determining insurance premiums. There’s a broad range of rates, and your insurance premium could range anywhere from $491 to over $9,000 annually, depending on your flood zone.[9]

“Since private flood insurance is from private insurers and agencies, they may select the flood insurance coverage they offer and choose what’s the best for you,” says Greene. “This means that flood coverage, rates and offers will be different from what you can get from the National Flood Insurance Program.”

Tip: “It’s important to [know] that in many situations a private flood insurance company could deny coverage because of claims or other situations where the National Flood Insurance Program could not,” says Chris Greene, founder of The Flood Insurance Guru.

Being prepared before having to deal with rising tides is the best way to protect your home and family from uncertainty or loss. So it could be worth it to spend a little time looking up the details of whether you need flood insurance.

Article Sources
  1. “Facts and Statistics: Flood Insurance,” Insurance Information Institute, https://www.iii.org/fact-statistic/facts-statistics-flood-insurance.
  2. “The First National Flood Risk Assessment: Defining America’s Growing Risk,” First Street Foundation, 2020, http://assets.firststreet.org/uploads/2020/06/first_street_foundation__first_national_flood_risk_assessment.pdf.
  3. “Did you know: Your home doesn’t have to be in a flood zone to be at risk” (video), FEMA, April 1, 2021, https://www.youtube.com/watch?v=DrvD-l2B3V0.
  4. “Flood Insurance Options: The NFIP VS. Private Flood,” National Flood Insurance, May 2020, https://nationalfloodinsurance.org/blog/NFIP-VS-Private.
  5. “Private flood insurance vs. NFIP coverage (FEMA).” ekinsurance.com. flood/private-flood-insurance-vs-nfip-coverage-fema.html#:~:text=Despite%20the%20benefits%20of%20private%20flood%20insurance%2C%20there,the%20NFIP%2C%20there%20aren%27t%20any%20guarantees%20for%20rene
  6. “What flood insurance covers,” National Flood Insurance Program, https://www.floodsmart.gov/whats-covered.
  7. Pat Howard, “How much does flood insurance cost?” Policygenius, Jan. 14, 2022, https://www.policygenius.com/homeowners-insurance/how-much-does-flood-insurance-cost.
  8. “National Flood Insurance Program Community Rating System,” FEMA, https://www.fema.gov/sites/default/files/documents/fema_community-rating-system_local-guide-flood-insurance-2018.pdf.
  9. Dillon Leovic, “Average Cost of Flood Insurance 2022,” ValuePenguin, Jan. 25, 2022, https://www.valuepenguin.com/average-cost-flood-insurance.

About the Author

Moira Alexandar

Moira Alexander

As a former accounting professional, Moira has been writing about finance, IT, project management, and other topics for digital publications and businesses including Technology Advice and CIO Magazine online over the past 10 years.

Full bio

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