What Is Flood Insurance, and What Does It Cover?
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Most homeowners and renters policies won’t cover flood damage, so those at risk need separate flood insurance.
Flood insurance covers damage from scenarios such as heavy rainfall, overflowing bodies of water and hurricane storm surges.
Flood insurance pays to repair the structure of your home and replace damaged personal belongings.
Most home insurance policies don’t cover flood damage, which can cost you tens of thousands of dollars even if there's just an inch or two of water. But say your house isn’t on the coast or near a body of water. Do you really need flood insurance?
Unfortunately, extreme weather is becoming more common, and in recent years floods have struck even areas not historically considered at risk. That’s why you might want to consider adding flood coverage. Homeowners in high-risk areas often pay thousands of dollars per year for flood insurance. But the cost of coverage in a moderate- to low-risk area could be less than your monthly cell phone bill.
Here’s what flood insurance covers and how to decide whether you should buy it.
What is flood insurance?
Flood insurance is a type of property insurance that covers specific kinds of water damage to your home and belongings. The nation’s biggest flood insurance provider, the National Flood Insurance Program, or NFIP, defines flooding as “an excess of water on land that is normally dry.” Flood insurance covers scenarios such as:
A river, lake or bay that overflows its banks.
A hurricane storm surge.
A heavy downpour that accumulates faster than it can drain.
A mudflow.
Homeowners, condo, renters and mobile home insurance policies generally don’t cover flood damage. So if your home is at risk of flooding, you’ll usually need to buy this coverage separately.
Although they won’t cover flood damage, homeowners and renters policies do cover some types of water damage. Examples include burst pipes and appliances that suddenly spring a leak. Learn more about homeowners insurance and water damage.
What does flood insurance cover?
Two types of flood insurance are available from the NFIP, each with a separate deductible: building and contents.
Building coverage
Building coverage is insurance for the structure of your home. (It’s similar to dwelling coverage on a homeowners policy.) It pays for flood damage to things like:
Electrical and plumbing systems.
Water heaters.
Furnaces.
Foundation walls.
Built-in appliances and cabinets.
Permanently installed carpets.
Detached garages.
Fuel and well water tanks.
The NFIP offers building coverage up to $250,000.
Contents coverage
Like personal property coverage on a homeowners or renters policy, contents coverage pays for damage to your belongings. On an NFIP policy, this includes:
Clothing.
Furniture.
Electronics.
Original artwork (up to $2,500).
Curtains.
Washers, dryers and microwaves.
Portable air conditioners.
The NFIP covers your stuff on an “actual cash value” basis. This means that if you file a flood insurance claim, your payout will reflect what your belongings were worth at the time of the flood.
Here’s an example: If floodwaters damage your 15-year-old recliner beyond repair, your policy will pay enough to buy a used recliner of similar age and quality — not enough for a new one. Multiply this type of gap by every item in your home, and you may find that your insurance payout isn’t nearly enough to replace what you lost.
NFIP policies offer up to $100,000 of contents coverage.
Flood insurance coverage beyond the NFIP
You may be able to get broader coverage and higher limits by buying flood insurance through companies that don’t work with the NFIP. For example, Neptune offers building coverage up to $4 million and contents coverage up to $500,000. Learn more about private flood insurance.
What doesn’t flood insurance cover?
The standard NFIP policy won’t pay for certain expenses, including:
Some water damage
The NFIP pays for damage only when naturally occurring flooding affects at least 2 acres and two properties. That means it won’t cover scenarios such as an overflowing bathtub that floods your bathroom. (Your homeowners insurance may cover that problem.)
Damage to certain parts of your home
The NFIP won’t pay for flood damage to any of the following:
Swimming pools.
Decks.
Patios.
Landscaping.
Valuable papers.
Currency.
Personal belongings in your basement.
Living expenses if you can’t live at home
If you need to move into a hotel or rent an apartment while contractors repair your home after a flood, you’ll have to pay those expenses yourself.
Vehicles
NFIP insurance won’t cover cars or other “self-propelled vehicles.” However, if you have comprehensive insurance on your auto policy, that coverage should pay for flood damage.
Private insurers tend to offer more coverage options and fewer exclusions. For instance, Neptune and Aon Edge can cover some expenses if you need to move out of your home during repairs. They also pay for swimming pool repairs or cleanup.
Do I need flood insurance?
Some people are required to buy flood insurance. For example, many mortgage lenders require homeowners in high-risk flood zones to buy flood insurance in order to get a loan. And if the federal government has given you grants or other flood assistance in the past, you must have flood insurance to qualify for similar aid in the future.
If having flood insurance isn’t a condition of your mortgage, you don’t have to carry it. However, even a small amount of flooding can cost you a lot of money.
One foot of water could cause more than $29,000 in damage to a 1,000-square-foot home. You can use the NFIP’s tool to estimate how much a flood may cost you based on the size of your home.
The NFIP’s average claim payout has been more than $36,000 through June in fiscal year 2022, according to the NFIP. And it’s not just people in the riskiest areas making claims. About 40% of NFIP claims from 2015 to 2019 came from policyholders outside high-risk flood areas.
Is my home at risk of flooding?
If you’re not sure how likely your home is to flood, there are a couple of places you can check. First, visit the Flood Map Service Center from the Federal Emergency Management Agency. Type in your address to see whether your home is located within a Special Flood Hazard Area, according to the federal government.
Another site to try is Risk Factor. This tool from a nonprofit organization uses climate change data to measure your home’s risk of flooding (as well as wildfires and severe heat).
If you live in a low-risk area, you may want to weigh the cost of coverage against the likelihood of having to file a claim. If your area has never had serious damage and you’re thinking of skipping flood insurance, consider setting aside money for any possible repairs.
Some states, including Mississippi and South Carolina, also allow residents to put their emergency funds in Catastrophe Savings Accounts. You don’t need to pay state income taxes on the money that you put into these accounts or on the interest it earns. However, you’ll still need to pay federal income taxes on that money, and you could face a penalty tax from the state if you spend it on anything besides disaster repairs.
Won’t the government help?
Some people don’t buy flood insurance because they assume they can get money from the federal government if their home ever floods. But this could be a costly choice.
FEMA does offer grants if the president declares your state a major disaster area and approves individual assistance in your county. However, the average FEMA disaster award is $5,000, which could fall well short of what you need to rebuild after a flood.
Extra funds may be available in the form of low-interest loans from the Small Business Administration. But unlike a flood insurance payout, you’ll need to pay this money back.
Learn more about how to get money if you don’t have flood insurance.
How much does flood insurance cost?
The average federal flood insurance policy costs about $771 a year, according to NerdWallet’s analysis. You could pay significantly more or less depending on where you live, the size of your home and other factors.
For example, choosing a higher deductible could reduce your premium. NFIP deductibles for residential properties typically range from $1,000 to $10,000 for each type of coverage.
To learn more and see the average cost of flood insurance in your state, see What does flood insurance cost?
How much flood insurance do I need?
The coverage you need depends on the size and structure of your house and the value of your belongings. For example, you may need more coverage if you live in a sprawling one-floor ranch than if your home has two stories and half your possessions are elevated beyond the reach of most floods.
An insurance agent can help you figure out how much building coverage to buy. Meanwhile, a home inventory is a good way to assess the value of your belongings.
If the NFIP doesn’t offer enough coverage, ask your insurance agent about excess flood insurance to fill the gap. Excess insurance generally offers identical coverage to your NFIP policy but with higher limits that kick in once you’ve exhausted your NFIP coverage. You can buy it from private companies such as Wright and SWBC.
Alternatively, you can skip the NFIP and look for private flood insurance with higher limits.
How to get flood insurance
You have several choices for buying flood insurance. The NFIP works with more than 50 insurers to sell its policies, so you may be able to get flood insurance from the same company that offers your auto or homeowners coverage.
You must live in one of the 24,000-plus communities that participate in the program to buy an NFIP policy. (Here's a list of participating communities.)
If NFIP insurance isn’t available in your area, look for private flood insurance companies. Even if you do have access to NFIP insurance, you may be able to get lower rates from a private insurer. A local independent agent can help you shop around.
Don’t wait until a hurricane is barreling down on your home to get covered. There’s typically a waiting period between when you buy flood insurance and when the coverage takes effect. For NFIP policies, the waiting period is usually 30 days, while other policies can have shorter periods of 10 to 14 days.
You may want to give your insurer an elevation certificate to see if it may help lower your premium. An elevation certificate is a document stating the lowest floor elevation of your home, which the insurer will use to determine your home’s flood risk. FEMA used to require elevation certificates for some property owners to get coverage, but this is no longer the case under Risk Rating 2.0.
You can get an elevation certificate from your local floodplain manager or hire a land surveyor or engineer to complete one for you.
