Les Masterson is a deputy editor and insurance analyst at Forbes Advisor. He has been a journalist, reporter, editor and content creator for more than 25 years. He has covered insurance for a decade, including auto, home, life and health. Before cove.
Les Masterson Deputy Editor, InsuranceLes Masterson is a deputy editor and insurance analyst at Forbes Advisor. He has been a journalist, reporter, editor and content creator for more than 25 years. He has covered insurance for a decade, including auto, home, life and health. Before cove.
Written By Les Masterson Deputy Editor, InsuranceLes Masterson is a deputy editor and insurance analyst at Forbes Advisor. He has been a journalist, reporter, editor and content creator for more than 25 years. He has covered insurance for a decade, including auto, home, life and health. Before cove.
Les Masterson Deputy Editor, InsuranceLes Masterson is a deputy editor and insurance analyst at Forbes Advisor. He has been a journalist, reporter, editor and content creator for more than 25 years. He has covered insurance for a decade, including auto, home, life and health. Before cove.
Deputy Editor, Insurance Jason Metz Lead Editor, InsuranceAs a former claims handler and fraud investigator, Jason Metz has worked on a multitude of complex and multifaceted claims. The insurance industry can be seemingly opaque, and Jason enjoys breaking down confusing terms and products to help others mak.
Jason Metz Lead Editor, InsuranceAs a former claims handler and fraud investigator, Jason Metz has worked on a multitude of complex and multifaceted claims. The insurance industry can be seemingly opaque, and Jason enjoys breaking down confusing terms and products to help others mak.
Jason Metz Lead Editor, InsuranceAs a former claims handler and fraud investigator, Jason Metz has worked on a multitude of complex and multifaceted claims. The insurance industry can be seemingly opaque, and Jason enjoys breaking down confusing terms and products to help others mak.
Jason Metz Lead Editor, InsuranceAs a former claims handler and fraud investigator, Jason Metz has worked on a multitude of complex and multifaceted claims. The insurance industry can be seemingly opaque, and Jason enjoys breaking down confusing terms and products to help others mak.
| Lead Editor, Insurance
Updated: Oct 31, 2023, 12:38am
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Too many homeowners think they don’t need flood insurance. Only about 5% to 15% of homeowners have it, according to the National Association of Insurance Commissioners. But 99% of counties in the U.S. are impacted by flooding, according to the most recent data from FEMA.
To make matters worse, many homeowners believe they’re already covered for flood damage by their homeowners policy. But even the best homeowners insurance policy won’t cover flood damage.
Without flood insurance, you could face a major financial disaster if your home gets hit by a flood. To put this in perspective, the average payout on a flood claim from the National Flood Insurance Program (NFIP) is $52,000, according to the most recent data from FEMA.
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:
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.
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, 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, 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.
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.
Flood insurance doesn’t cover every type of water damage. A flood policy from the NFIP typically does not cover:
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.
There are two ways to get flood insurance:
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.
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.
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.
If you run a business, a standard small business insurance policy won’t cover flood-related claims. You’ll need a separate flood insurance policy.
A commercial flood insurance policy from the NFIP offers:
The building property portion of a commercial flood insurance policy covers flood damage to your building, including:
The personal property portion of a commercial flood insurance policy covers flood damage to items such as:
NFIP commercial flood insurance policies pay the actual cash value for personal property. This takes depreciation into account.
A commercial flood insurance policy from the NFIP does not cover:
You may be able to get commercial flood insurance through the private market. For example, Neptune Flood sells commercial flood insurance to small and medium-sized businesses, you can buy up to $4 million in coverage and up to $25,000 ($500 per day for up to 50 days) in business interruption insurance if you cannot open your business due to a flood.
A standard mobile home insurance policy won’t cover damage from flooding. You will need to get a separate flood insurance policy. You may be eligible for flood insurance for mobile and manufactured homes from the NFIP for six different foundation types:
Flood insurance for mobile and manufactured homes from the NFIP covers up to $250,000 in building coverage and $100,000 in contents coverage.
You may be able to find flood insurance for mobile and manufactured homes on the private market, though not all insurers offer it. For example, mobile and manufactured homes are ineligible for flood coverage from Neptune.
If you live in a condo, a standard condo insurance policy won’t cover flood-related damage. You’ll need to buy a separate flood insurance policy. Flood insurance for condos can generally be broken down into two types:
This covers the building structure and some interior items of the building, like carpets, electrical systems, furnaces, heat pumps and central air-conditioning units.
Flood insurance through the NFIP is available for eligible buildings under a Residential Condominium Building Association Policy (RCBAP). An RCBAP does not apply to condominiums in which 25% or more of the building is for non-residential use or to non-residential buildings like pool houses, clubhouses and detached storage buildings. Coverage is limited to $250,000 (multiplied by the number of units or the replacement cost of the building, whichever is less) and $100,000 in commonly owned contents in the building.
If your building is ineligible for flood insurance through the NFIP or you want higher limits than what’s offered by the NFIP, you may be able to get flood insurance through the private market. For example, Neptune flood insurance offers RCBAP flood policies with building coverage limits up to $2 million per unit/$2 million per building and $500,000 of contents coverage.
This covers personal items inside your unit, like your clothing, furniture and electronics. Flood insurance from the NFIP is obtained through a “dwelling form.” Coverage is limited to $250,000 and your flood-damaged items will be reimbursed on an actual cash value basis, which takes depreciation into account.
If you cannot get flood insurance through the NFIP or want higher limits, you may be able to get flood insurance for your personal items through the private market. For example, Neptune flood insurance offers up to $500,000 in contents coverage for condo unit owners.
If you rent your home, a standard renters insurance policy won’t cover flood damage. While your landlord’s flood insurance will cover flood damage to the building, it won’t cover flood damage to your personal belongings. A separate flood insurance policy is needed if you want coverage for flood damage.
Flood insurance for renters from the NFIP is also called contents coverage. You can purchase up to $100,000 in coverage and prices start around $100 per year. It covers your personal items if they’re damaged by a flood, such as:
If your items are damaged by a flood, you’ll be reimbursed on an actual cash value basis, which takes depreciation into account. NFIP flood insurance for renters does not cover additional living expenses if you cannot live in your home due to a flood.
To be eligible for an NFIP renters flood insurance policy, you must live in a community that participates in the NFIP. Flood policies from the NFIP have a 30-day waiting period before coverage kicks in, so make sure you buy a policy as soon as possible.
If your community does not participate with the NFIP, you may be able to buy a renters flood insurance policy from a private insurance company.
The average cost of an NFIP flood insurance policy is $859 a year, according to Forbes Advisor’s analysis of flood insurance costs.
Here’s a look at the average coverage amount and annual cost by state for an NFIP flood insurance policy.
Your flood insurance cost will vary depending on several factors, such as:
The insurance deductible is the amount that’s deducted from your insurance claim check. For instance, if your home suffers $20,000 worth of flood damage and your deductible is $1,000, the insurance company will send you an insurance check for $19,000.
A higher deductible amount will result in lower flood insurance costs. You might also qualify for a discount. For example, FEMA offers up to a 40% discount if you select a $10,000 deductible, which is the highest NFIP flood insurance deductible for residential buildings.
You may qualify for mitigation discounts if you take steps to reduce your flood risk. For example, FEMA offers discounts to homeowners who take actions such as installing flood openings and elevating equipment and machinery (like a hot water heater or central air conditioner) above the first floor.
You may qualify for lower flood insurance costs if you have an elevation certificate that shows your first floor is higher than the first floor determined by FEMA.
More than 1,000 communities qualify for cheaper flood insurance based on the NFIP’s Community Rating System (CRS). CRS discounts are based on your community’s actions to reduce flood risk, such as establishing floodplain management programs. Ask your insurance agent if your community participates in the CRS.
The majority of homeowners who buy flood insurance get it from the NFIP, but you may have options through the private market. It’s a good idea to get flood insurance quotes from both the NFIP and private flood insurance companies.
The National Flood Insurance Program from FEMA is backed by the federal government and offers basic flood insurance. There won’t be many choices to make if you buy a FEMA flood insurance policy.
To buy a FEMA policy you’ll go through a regular insurance company, such as Allstate or Farmers, not directly to the NFIP. Here’s an NFIP insurance provider locator.
FEMA policies have a 30-day waiting period before coverage takes effect after the purchase, unless the policy purchase is tied to a loan that requires flood insurance. So don’t wait until hurricanes start to form to start shopping for flood insurance.
Federal flood insurance covers two main things: Your house (the building) and your belongings (contents). You can buy a building-only policy, a contents-only policy or both.
The FEMA flood program offers two choices for building coverage: Replacement cost vs. actual cash value coverage.
Contents, such as furniture, always get actual cash value coverage from the federal flood insurance plan. That can leave you with a big gap between your insurance check and what you need to buy new stuff. Keep this in mind as you look at flood insurance options.
FEMA flood insurance does not cover “additional living expenses” or “loss of use.” This would reimburse your extra expenses if you can’t live at home because of flood damage.
To buy federal flood insurance, your community must participate in the NFIP. Yours likely does, but you can look it up here.
In the past, FEMA used “flood zones” to set flood insurance rates. But this system led to inaccurate pricing for many properties, and contributed to the massive debt of the National Flood Insurance Program (currently at more than $20 billion).
FEMA launched Risk Rating 2.0 as a means to address its outdated rating methodology, citing advances in technology, access to data and an evolution in understanding flood risk. It was effective for new policyholders and existing policyholders who wanted to take advantage of new rates on Oct. 1, 2021. Risk Rating 2.0 became effective for all remaining policies renewing on or after April 1, 2022.
Instead of using flood zones, Risk Rating 2.0 calculates flood insurance rates based on:
FEMA says the key benefits of Risk Rating 2.0 are:
To develop Risk Rating 2.0 rates, FEMA says it used data from multiple sources, including:
Private flood insurance options can give you better coverage than a FEMA policy. Private flood insurance policies can be stand-alone, meaning they provide your primary, or base, flood insurance. Or they can be “excess,” meaning they provide additional coverage on top of a base policy, such as a FEMA policy.
Despite the better coverage options, private flood insurance is a very small percentage of the overall market. The Wharton Risk Management and Process Decision Center estimates that private flood policies comprise only 3.5% to 4.5% of primary residential flood policies.
Zurich Insurance Group has the largest market share in the private flood insurance market, making up 16% of the market share, according to the Insurance Information Institute. It’s followed by American International Group (14.9%) and Assurant, Inc. (10.2%).
If you have a large and/or expensive property and want the best coverage, you’ll want to look into a base policy plus an excess flood insurance policy. Here are some examples.
Zurich has teamed with Wright National Flood Insurance Services to offer stand-alone flood policies in:
Customers can customize a policy to meet the needs of the property, with up to $1 million in dwelling coverage, replacement cost for both the dwelling and personal property, and no waiting period. The policies are sold through agents who sell Wright Flood insurance.
Because Zurich has better coverage options than a FEMA flood insurance policy, average prices are higher. For example, in New Jersey, the average Zurich flood policy premium is about $16,300 a year, according to a filing made with the New Jersey department of insurance.
