Flooding is the most common natural disaster in the United States, and it is also the most misunderstood. Many homeowners assume their standard home insurance covers flood damage. It does not. A standard homeowners or renters policy almost never covers flooding, so homeowners who live near water, or in any area that can flood, need separate cover.
Flood insurance is a separate policy that pays to repair or replace property damaged by flooding. This guide explains what it covers and excludes, how much it costs, and how to buy it before you need it.
What Is Flood Insurance?
Flood insurance is a standalone policy that covers direct physical damage to your home and belongings caused by flooding. It is separate from your homeowners and renters insurance. Most flood insurance policies in the United States are sold through the National Flood Insurance Programme, known as the NFIP, which is administered by the Federal Emergency Management Agency, or FEMA. Private insurers also sell flood cover, often with higher limits and fewer exclusions.
Under the NFIP, a flood is defined as a general and temporary condition where normally dry land is partially or completely underwater, affecting at least two acres or two properties. That definition matters, because it means a burst pipe or a leaking water heater is not a flood, even if your basement is full of water.
The NFIP has about 4.7 million policyholders and nearly $1.3 trillion in coverage. It was created by Congress in 1968 and is delivered through more than 47 private insurers and NFIP Direct.
Why Standard Home Insurance Does Not Cover Floods
Standard homeowners insurance covers damage from fire, theft, wind, and burst pipes, but it excludes damage from flooding. The reason is that flood risk is concentrated and catastrophic. A single flood can damage thousands of homes at once, which makes it difficult for a standard insurer to price the risk.
This gap catches many homeowners by surprise. About one in four flood claims come from outside high-risk flood zones, according to FEMA. If you live near a river, a lake, or a coast, or in an area that gets heavy rainfall, you may need flood insurance even if your lender does not require it. Our guide to business insurance explains how the same principle of separate cover applies to commercial property.
What Flood Insurance Covers
Flood insurance has two parts: building coverage and contents coverage. Each is usually purchased separately, with its own deductible. The NFIP caps residential building coverage at $250,000 and contents at $100,000. For commercial properties, the caps are $500,000 for the building and $500,000 for contents.
Building coverage may pay for the structure and its essential systems: the foundation, electrical wiring, plumbing, central air conditioning, furnaces, water heaters, and built-in appliances such as dishwashers, ranges, and refrigerators. It also covers permanently installed carpeting and panelling.
Contents coverage protects your belongings: furniture, clothing, electronics, curtains, portable air conditioners, washers and dryers, and food freezers and the food in them. Contents are paid at actual cash value, which means depreciation is subtracted from the claim. Building coverage is usually paid at replacement cost if you have enough cover.
Flood insurance also covers debris removal, loss-avoidance measures such as sandbags, and the cost of removing property to safety before the flood. It can also cover upgrades to comply with floodplain management laws, such as elevating the structure or using flood-resistant materials, up to $30,000 through Increased Cost of Compliance coverage.
What Flood Insurance Does Not Cover
Flood insurance has important exclusions. It does not cover additional living expenses, meaning the cost of temporary housing while your home is repaired. If a flood forces you out for weeks, you pay for the hotel yourself unless you have separate cover.
It does not cover damage caused by moisture, mildew, or mould if the homeowner could have reasonably prevented it, or damage from earth movement, even if the earth movement was caused by a flood. It does not cover cars or other vehicles, or personal belongings stored outside your home, such as in an outdoor shed or on a deck. Most policies also exclude basements and below-ground spaces, although permanent fixtures such as the furnace and water heater are often covered. The basement exclusion is a frequent source of denied claims.
Insurance terminology can be confusing when you compare policies. Our guide explains what insurance IMO stands for and other terms you may see in policy documents.
How Much Does Flood Insurance Cost?
The average flood insurance premium under the NFIP is about $700 a year, which is roughly $58 a month. The average premium for a policy in a moderate-risk zone is lower, and the average premium in a high-risk zone is higher. Your exact cost depends on your flood zone, the elevation of your home, the type of construction, and how much cover you choose.
NFIP premiums are set using a system called Risk Rating 2.0, which uses flood risk, distance to water, elevation, and the replacement cost of the home to set rates. A home at high risk can cost several thousand dollars a year to insure, while a low-risk home may cost less than $500.
NFIP vs Private Flood Insurance
| Feature | NFIP | Private insurers |
|---|---|---|
| Building cover | Up to $250,000 | Up to $1 million or more |
| Contents cover | Up to $100,000 | Up to $500,000 or more |
| Additional living expenses | Not included | Usually included |
| Replacement cost cover | Usually, if limits are high enough | Usually |
| Waiting period | 30 days | 10 to 14 days |
The 30-Day Waiting Period
Flood insurance usually has a 30-day waiting period. That means your cover starts 30 days after you buy the policy, not the day you sign it. If a flood damages your home during that waiting period, the damage is not covered.
The waiting period does not apply in a few cases. It does not apply if you are buying flood insurance because your lender requires it to close on a mortgage. It does not apply if you have recently mapped into a high-risk zone and buy a policy within 13 months of the map change.
Do You Need Flood Insurance?
About one in four flood claims come from outside high-risk flood zones. Even if your mortgage lender does not require flood insurance, you may need it. A flash flood, a heavy storm, or a distant dam failure can cause flooding far from a mapped flood zone.
You need flood insurance if you live in a high-risk flood zone, if your lender requires it, or if your home is at risk from heavy rainfall, tidal surge, or a nearby river or lake. You do not need it if you live in a low-risk area, your home is elevated, and your risk profile is low, but you may still want it for peace of mind.
Our guide to how much pet insurance costs explains a similar decision about protecting yourself from a large, unexpected bill.
How to Buy Flood Insurance
You can buy flood insurance from your insurance agent, who can offer both NFIP and private options. You can also search online for companies that sell flood insurance in your area. Get quotes from more than one company, because prices vary widely.
Remember the waiting period: buy flood insurance well before hurricane or storm season, because your cover takes 30 days to start.
Frequently Asked Questions
Is flood insurance required?
It depends on where you live. If your mortgage is backed by the government, and your home sits in a high-risk flood zone, flood insurance is required. The requirement applies to the life of the loan, even if the map changes after you bought the home.
Does home insurance cover flooding?
No. A standard homeowners or renters policy almost never covers flooding. You need a separate flood insurance policy.
How much does flood insurance cost?
The average NFIP premium is about $700 a year. The exact cost depends on your flood zone and elevation, the type of construction, and how much cover you choose.
Can I buy flood insurance after a flood?
Yes, but the 30-day waiting period still applies, so the policy will not cover damage from the flood that already happened.
Does flood insurance cover basements?
Only in a limited way. Most policies cover the foundation, furnace, water heater, and permanently installed carpeting, but not personal belongings stored in the basement.
Does flood insurance cover hurricanes?
It covers damage caused by flooding from a hurricane, but not damage from wind. Wind damage is covered by your homeowners policy.
Conclusion
Flood insurance covers direct physical damage from flooding, including the building and its contents, up to the limits of your policy. Standard home insurance does not cover flooding, so a separate policy is the only way to protect yourself from flood damage.
If you are buying a home or refinancing, ask your lender whether flood insurance is required. If it is not required, check your flood risk anyway, because one in four flood claims comes from outside high-risk zones. To confirm the latest programme details and check your flood zone, visit the official FEMA FloodSmart website.
