Flood Insurance: What It Costs and What It Covers

Flooding is involved in 90% of all natural disasters. As the most common natural disaster in the US, damages exceeded $20 billion in 2021, according to the National Centers for Environmental Information. 

As weather patterns continue to change, it’s best to be prepared. According to the Federal Emergency Management Agency, 99% of US counties have been affected by flooding in the past 25 years, and more than 40% of federal flood insurance claims between 2014 and 2018 were filed outside of high-risk flood zones.

Most standard homeowners insurance policies do not include coverage for floods. But if you’re in an area prone to hurricanes or floods, you can protect your finances with a flood insurance policy.

Since policies typically take 30 days to kick in, now could be the best time to get coverage for a low rate. Read on to learn everything you need to know about flood insurance, including what it covers and how much it costs. 

Read more: Flood Prevention Checklist: Protect Your Home From Water Damage

What is flood insurance?

Flooding may result from heavy rains, snowmelt and hurricanes, but it also comes from failed dams and storm drain blockages. Flood insurance supplements your basic home insurance policy -- which usually doesn’t cover flooding -- with coverage for your home’s structure and contents if they’re damaged by floodwaters.

Although most homeowners obtain flood insurance through the National Flood Insurance Program, private flood insurance policies are becoming increasingly popular options because they offer broader coverage at generally lower prices. The pricing disparity has grown more pronounced since the NFIP enacted its new rating model, which included major rate increases for 77% of policy holders across the country.

Every home in the country is assigned a flood zone, divided between low-, moderate- and high-risk areas. You can find out your risk level on the FEMA flood zone map (high-risk zones are designated by the letters A or V). If you own a home in a high-risk area with a government-backed home loan (FHA, USDA or VA), your lender will require you to get both flood and homeowners’ insurance. Flood insurance is optional for homeowners and renters in low- and moderate-risk areas, however, or homeowners in high-risk areas with conventional mortgages.

How flood insurance works

Flood insurance works similarly to other insurance policies. You pay a monthly or annual premium; if a flood occurs and your property is damaged, you receive a payout up to your policy limits to repair the damages (according to the specifics of your policy terms).

NFIP coverage is an annual policy that automatically renews each year. Limits are currently capped at $250,000 for the structure and $100,000 for “contents coverage,” which applies to what’s inside your home. Private flood insurance may offer different policy lengths and higher limits -- up to $500,000 for the structure and $250,000 for contents. Higher deductibles come with lower premiums but may require a higher out-of-pocket cost if you file a claim.

There is typically a 30-day waiting period from the time you buy a flood policy until it becomes effective. This waiting period can be waived if:

• You’re buying flood insurance when altering your home loan.
• You buy flood insurance after a wildfire has caused flooding on burned federal land, and the policy is bought 60 days or less from the wildfire containment date.
• Your home has been newly mapped into a high-risk flood zone, and you buy insurance within 13 months of the map update. In this case, there is only a one-day waiting period.

Private flood insurance generally has a 14-day waiting period and offers broader coverage options than NFIP insurance.

What’s covered by flood insurance

What is covered by flood insurance is the same whether you buy privately or through the NFIP. Structure coverage typically includes:

• Appliances including your dishwasher, refrigerator, stove, oven, furnace, water heater and heat pump
• Permanently installed items such as cabinets, paneling, bookcases, carpets, staircases, anchoring systems and foundation walls
• Detached garages
• Window blinds
• Electrical and plumbing systems
• Solar energy systems
• Fuel tanks

If your entire home needs to be replaced or rebuilt, you’ll need to meet the 80% rule -- the property must be your primary residence for at least 80% of the year, and you’ll need a policy that covers at least 80% of your home’s value.

Contents coverage, which covers what’s inside of your structure, typically includes:

• Washer
• Dryer
• Microwaves
• Curtains 
• Portable air conditioners
• Carpets not permanently installed, like area rugs and runners
• Personal belongings, such as furniture, clothes, electronics, kitchenware and so on
• Up to $2,500 in valuables such as jewelry, fine arts and furs

Contents coverage is valued at actual cash value, which pays based on the depreciated cost for damaged belongings.

Items that aren’t typically covered by flood insurance include:

• Most furniture and items stored in basements or below-ground rooms
• Cars 
• Valuable papers, including cash, currency, stock and bond certificates and precious metals
• Property outside of the home, such as a deck, patio, fence, swimming pool, hot tub, landscaping or septic systems
• Mold, mildew or moisture damage
• Additional living expenses and temporary housing while the home is unlivable during repair

Limited coverage is offered for basements and below-ground living spaces. In these areas, built-in appliances and drywall damage are covered, but most personal items, window treatments, paneling, bookcases and floor coverings are typically not protected. When a flood risk is imminent, the NFIP recommends moving items in underground areas to higher floors to prevent or limit damage.

Private flood insurance may feature expanded coverage plans with higher limits for dwelling and contents coverage, swimming pool repair, coverage for lost business expenses and additional living expenses. 

The cost of flood insurance

The average cost for flood insurance through the NFIP in a year was $700 for $250,000 in dwelling coverage in 2019. Homeowners and renters in low- and moderate-risk flood zones can purchase preferred risk policies, which offer the same coverage as standard policies and start at $100 a year. With the NFIP’s new equitable pricing model in effect as of October 1, 2021, the majority of US policy holders have seen an increase in rates, with 66% of NFIP policyholders paying up to $10 more every month, 7% paying $10 to $20 more per month and 4% paying $20 or more a month. 

If your home floods and you’re not insured, you may not receive assistance from the government. Federal disaster assistance is available only when the president makes a formalfederal disaster declaration -- and this aid is usually limited to a $5,000 loan that you will have to repay.

Do I need flood insurance?

If you live in a high-risk flood zone, you may be required to get flood insurance. If not, flood insurance is optional. Homeowners can choose to buy home and contents coverage; renters are eligible only for contents-only flood insurance. 

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