What Is Flood Insurance and Do You Need It?

WRITTEN BY: Mark Romero


Flood insurance is an additional policy that helps pay for the cost of repair or replacement for parts of your house and any belongings damaged by flooding. It isn’t a requirement in all locations, but it’s handy if you’re in an area prone to heavy rainfall, snowstorms, tropical storms, or hurricanes.

What is Flood Insurance?

Flood insurance is property insurance that covers losses sustained by water damage caused by flooding. Like with homeowner’s insurance, the coverage included depends on your policy limits.

Typical causes of flood damage are heavy or prolonged rainfalls, tropical storms or hurricanes, melting snow, blocked storm drainage systems, or levee dam failure. You should review your coverage to ensure all perils possible in your area are named as covered losses.

Does Homeowner’s Insurance Cover Flood Damage?

No. Your homeowner’s insurance policy doesn’t cover flood damage. A policy is important if you live in a designated high-risk flood zone. Lenders typically require those in high-risk flood areas to have flood coverage.

How Does Flood Insurance Work?

Flood insurance is a supplemental policy that works with your homeowners insurance. Standard home insurance policies only cover water damage created during a natural disaster. However, this doesn’t include damage caused by floodwaters, which typically happens over time due to a natural disaster, but not during it.

Your flood policy has coverage limits and a deductible, just like your home insurance policy. You pay an annual premium based on your area’s flood risk level. Then, in the event of a flood, your insurance company pays to fix damages and replace personal belongings damaged by floodwaters, less your deductible.

What Are The Two Types of Flood Insurance Available?

You can choose between two types of flood insurance: Insurance from the National Flood Insurance Program (NFIP) or insurance from a private flood insurance company. 

1. National Flood Insurance Program (NFIP)

The National Flood Insurance Program (NFIP) has more than 5 million policyholders across the United States, making it the largest single-line insurance program in the country. The program provides more than $1 trillion in flood damage protection.

The NFIP Direct system is managed by the Federal Emergency Management Agency (FEMA). So while you purchase NFIP policies from private insurance companies, FEMA underwrites them. This helps limit inflation costs often passed on to homeowners and renters in flood zone areas.

NFIP policies include both personal property and building coverage. Although, renters only have content coverage since costs of damage to the actual building are the property owner’s responsibility.

To determine eligibility, locate your community on the high-risk flood zone map on the Floodsmart.gov website. If you are eligible, contact an NFIP insurance agent to find a plan.

2. Private Flood Insurance

Private plans are policies not underwritten by the federal government. Because NFIP or FEMA doesn’t monitor them, costs sometimes vary.

These policies have the same coverage types as their government-written counterparts, but they’re more expensive for several reasons:

  • Not many insurance companies offer private it
  • Private insurance typically offers more coverage than an NFIP plan.
  • You get coverage faster with a private plan.
  • Claims are often processed faster with private insurance plans.

How Are Flood Insurance Costs Calculated?

Insurance companies consider your location, your home’s structure, the location of the nearest body of water, and your property’s elevation when determining your rates. Additionally, the property age, the property size, and your flood zone designation are also used.

On average, the annual cost for an NFIP policy is about $700. Average premiums for private insurance tend to be higher.

Policy Considerations

This insurance is pretty straightforward, but there are a few things you need to keep in mind when purchasing a policy.

NFIP Premiums Don’t Vary

NFIP insurance quotes for your home won’t differ. FEMA underwrites every NFIP policy, and the sole purpose is to regulate the rates. This makes getting a policy easy. There’s no need to get multiple premium quotes. In most cases, you can obtain insurance directly through your home insurance company.

NFIP Policies Don’t Cover Everything

These policies don’t cover these things:

  • Basements (or any area of your home that is below ground level)
  • Damage caused by moisture or mold that could have been prevented
  • Damage caused by earth movement, even if the movement was caused by flooding
  • Financial losses caused by business interruption
  • Precious metals
  • Stock certificates
  • Bearer bonds or cash
  • Features outside of your home
  • Temporary housing
  • Loss of income
  • Cars

NFIP Waiting Period

Once you purchase your insurance policy, the coverage will not go into effect until 30 days after you purchase it. If you want to be prepared for seasons with a higher risk of flooding, purchase your insurance.

The 30-day wait period is specific to NFIP policies, so if you want your insurance in a shorter period, you might need to look into private insurance policies (if they are available in your area).

Keep in mind the 30-day waiting period is only applicable to NFIP policies. If you need a policy effective sooner than 30 days from the date of purchase, you must look into private policies.

You Have To Pay Premiums In Full

Unlike standard homeowner insurance policies, these policies must be paid in full at the time of purchase. There isn’t a monthly premium associated with these plans, so you must make sure you can afford the cost upfront.


Why is flooding not covered by homeowner’s insurance?

Insurance companies don’t want to cover flood damage because it’s a high risk.

The World Health Organization (WHO) lists floods as the most frequent type of natural disaster. Because there’s such a high risk for flooding, insurers hesitate to cover flood damage on a standard homeowner’s insurance policy.

Is flood insurance a good idea?

According to FEMA, floods can happen anywhere, and flood damage can occur in as little as one inch of water. So you should consider getting this insurance even if you don’t live in a high-risk flood zone.

What’s the average cost of flood insurance in California?

As of June 2022, the average cost of this insurance in California is $916. This is $145 more than the U.S. average of $771 annually.

What’s the average cost of flood insurance in Texas?

As of June 2022, the average annual cost of this insurance in Texas is $676. This is $95 less than the national average of $771 per year.

Does flood insurance protect your belongings?

Yes, this insurance does cover personal property. However, jewelry, art, and other collectibles only have up to $2,500 in coverage. Check the details of your policy to ensure you’re adequately covered.

Getting Flood Insurance

The first step to getting flood insurance is getting homeowner’s insurance. Once you have your home insurance policy, obtaining it is as simple as telling your insurer you need it. Get homeowner’s insurance quotes today.