Guide to flood insurance for homeowners

Flood insurance, which isn’t included in standard homeowners insurance policies, is only required if you live in a federally designated flood zone and the terms of your mortgage specify that you need to carry it. But flooding can happen anywhere, especially as climate change increases the intensity of storms, says Andrew Hoffman, a professor of sustainable enterprise at the University of Michigan.

“Increased storm frequency and severity is the new normal of a climate-changed world,” Hoffman says. “The number of people who need flood insurance and the number of people who have it are completely out of whack.”

About 9 percent of U.S. homes are likely to experience at least one natural flooding event measuring a foot or more within the next 30 years, according to a Congressional Budget Office (CBO) report. And among those at-risk properties, about 92 percent are not covered by a flood insurance policy.

“Instances of flooding appear to be increasing and are currently the nation’s costliest natural hazard,” the Department of Homeland Security said in its flood fact sheet.

Damage caused by floods

Extreme weather events are becoming more intense and more common because of climate change, according to the World Meteorological Organization. In 2024, the global average temperature reached a new high, beating the record set the previous year, National Oceanic and Atmospheric Administration (NOAA) data going back to 1850 show. 

A warming ocean has resulted in more vapor being added to the atmosphere, supercharging storms and increasing flooding in areas that haven't been designated as being at risk for floods. According to the Federal Emergency Management Agency (FEMA), about 40 percent of National Flood Insurance Program (NFIP) insurance claims come from properties outside of flood hazard zones.

Natural floods cause between $17.9 billion to $23.5 billion in damage to U.S. homes each year, according to a report last year by the Congressional Joint Economic Committee. To be financially protected from a flood, homeowners need flood insurance through the NFIP or a private flood insurance company. Bankrate's flood guide can help you make informed decisions about flood insurance.

What is flood insurance and how does it work?

Similar to home insurance, flood insurance offers financial protection if your home and personal belongings are damaged by flooding. Flooding is defined as an overflow of water onto land that is typically dry, but flood policies do have some limitations. Mudslides, for example, are not typically covered by flood insurance, whereas mudflows usually are. Similarly, damage from a burst pipe or sump pump is also not considered damage from a flood.

Flood insurance policies are offered through the NFIP and some private insurance companies. However, a few insurance companies, such as Kin, offer flood coverage as an endorsement, which is an optional addition to a homeowners policy rather than a separate policy.

When you buy flood insurance from the NFIP, your policy does not take effect immediately. There is typically a 30-day waiting period before your coverage goes into effect and you can file a claim. However, this period could be waived in a few scenarios, including if you need flood insurance to close on or refinance a mortgage or if your home has been included in a newly designated flood zone within a certain timeframe. Private flood insurance companies may also offer shorter waiting periods (typically around 10 days) or no waiting period at all.

What does flood insurance cover?

Flood insurance policies from the National Flood Insurance Program come with two types of coverage: dwelling coverage and contents coverage. Here is what’s covered:

• Dwelling coverage: This is the backbone of your flood insurance and is mandatory to purchase a policy — you cannot waive your dwelling coverage. Dwelling coverage provides financial protection from the damage that flooding can cause to the structure of your home, built-in appliances and attached structures. If you get NFIP coverage, the dwelling insurance portion of your policy is capped at $250,000, regardless of the market value of your home.
• Contents coverage: Contents coverage covers your personal belongings, including your clothing, furniture and home decor, up to your policy limits. This is optional coverage; you can purchase NFIP flood policies without personal property coverage. NFIP policies cap contents coverage at $100,000.

Private insurance companies may offer more policy options, higher dwelling and contents limits and different flood insurance rates compared to NFIP policies. To determine if you need higher flood insurance coverage limits, you might want to consider your dwelling and contents coverage limits in your standard homeowners policy and compare that against the likelihood of catastrophic-level flood damage occurring above the $250,000 and $100,000 limits. Keep in mind when you're looking at how much money you would need to rebuild that it's for the structure only —  not the value of the land your house is on.

Another benefit of private flood insurance is that policies can often be activated within 10 days or less, versus the 30-day waiting period for NFIP plans. Keep in mind, however, that private carriers may impose a moratorium on issuing new policies if there is an impending storm or other major weather event. As with home insurance, getting quotes from a few different private flood insurance carriers can help you find the best coverage for your needs at the most affordable price.

What is not covered under flood insurance?

Like home insurance policies, flood insurance policies have exclusions. These can include:

• Damage caused by moisture, mildew or mold that could have been prevented
• Damage caused by earth movement, including landslides
• Damage to outdoor structures like decks, patios, pools and landscaping
• Additional living expenses if you are displaced due to flood damage to your home

Because flood insurance is designed to cover damage caused by natural floods, your policy might not cover sources of internal water damage, such as failed sump pumps or burst pipes. These types of accidental and sudden water damage might be covered by your home, condo or renters insurance policies, depending on the coverage you have. However, keep in mind that the coverage types that apply to these situations may require opting to purchase endorsements for an added cost.

Is flood insurance required?

In some cases, yes. Flood insurance is mandatory for homeowners living in high-risk flood zones with federally backed mortgages. Some of the most common government-backed mortgages are FHA, USDA and VA home loans and mortgages guaranteed by Fannie Mae and Freddie Mac. Lenders for other types of mortgages are also likely to mandate flood coverage if the property is located in an area with a history of flooding.

A flood can happen almost anywhere, though — not just on coasts or near riverbeds. FEMA reported that, between 1996 and 2019, 99 percent of all U.S. counties experienced a flood event. So even if you’re not required to have flood insurance, most insurance experts recommend carrying it.

Is flood insurance worth it?

Most insurance experts agree that flood insurance is worth it for many homeowners. Between 2016 and 2022, the average claim payout from an NFIP policy was more than $66,000, according to FEMA. Since flood damage isn’t covered by a home insurance policy, homeowners without flood insurance would be on the hook for those repairs.

Flood insurance is usually only required in specific circumstances, such as getting a mortgage on an oceanfront vacation home or other properties in high-risk flood zones. However, flood coverage can be a good investment, even if you aren’t terribly concerned about the risk of flood damage. You might consider flood insurance if:

• Your home is in a flood zone, and you have a government-backed mortgage. Most insurance companies require flood insurance for homes in moderate- to high-risk flood zones. Recent Florida legislation requires Citizens policyholders with wind coverage to maintain flood insurance, as well as owners with government-backed mortgages.
• Your home is in a high-risk flood area. You can check your flood risk using FEMA’s mapping tool. If flooding is common or likely in your area, buying a flood insurance policy could be a good idea. Remember that there is typically a 30-day waiting period before coverage goes into effect, so you probably don’t want to wait until there is a storm that could cause flooding in the forecast.
• Your home is likely to experience a flood event in the near future. According to the latest report from First Street, FEMA's risk assessment for flood zones does not account for the increased level of precipitation caused by climate change. Therefore, millions of homes not included in the flood zones could experience a severe flood and be without flood insurance. Using online tools such as Flood Factor can help you understand the likelihood of a flood event occurring in your area.
• You do not have the finances to repair flood damage. Even if you are not in a flood zone, your property could still flood. If you do not have the finances to repair your home or replace your belongings after a flood, you might want to consider a flood insurance policy.

Types of flood insurance

Originally, flood insurance was included in home insurance. However, due to the expensive and unpredictable nature of flood claims, private insurance started excluding coverage more than five decades ago. In 1968, the federal government created the NFIP so that homeowners who lived in areas with high flood risk could purchase financial protection from flooding. Some private insurance companies have developed systems to accurately price flood risk and have begun offering flood coverage, giving homeowners more options today.

When it comes to private flood insurance vs. NFIP coverage, understanding the differences between the programs could help you determine the best flood insurance companies to request quotes from.

National Flood Insurance Program

The National Flood Insurance Program gives homeowners access to federally backed flood insurance. NFIP insurance is available in most areas of the U.S. to any homeowner, regardless of flood risk, and offers up to $250,000 in building coverage and $100,000 in contents coverage.

If you own a business, you can purchase an NFIP commercial policy with up to $500,000 in building coverage and up to $500,000 for contents. For both residential and commercial flood policies, these coverage types generally have separate deductibles and may need to be purchased separately.

Flood policies are issued by private insurance companies that are authorized by the NFIP to sell the coverage.  To find an agent who can issue flood insurance, use the search tool on the NFIP website. To get a quote directly from the NFIP that you can take to an agent, click “Get a Quote” on the NFIP web page and answer a few questions about your home.

Private flood insurance

Private flood insurance also covers the structure of your home and its contents from flood damage, except it receives no support from the federal government. Instead, private flood insurers are companies that either rely on a reinsurer or money collected from premiums to cover losses.

Private flood insurance policies can be more robust than NFIP policies, and you might have access to more coverage options and higher policy limits than you do with federally underwritten policies. Additionally, waiting times for private flood insurance might be shorter than the 30-day period the NFIP requires.

How much does flood insurance cost?

The average cost of flood insurance is $870 per year. Back in 2021, FEMA changed its method for determining flood insurance costs to include a broader range of statistics.

As of April 2023, all flood policies have been renewed according to a new rating system called Risk Rating 2.0. The program is designed to reflect the difference in replacement costs between lower-value and higher-value homes and more accurately rate an individual property’s risk of flood damage. Flood premiums for riskier properties may see increases each year until their premiums align with the probability of flood damage to those specific properties. For most homeowners, the increases are capped at 18 percent a year.

If you opt for coverage through a private insurer, rates will vary by company. In addition, the price of your flood insurance will depend on several factors, including:

• Flood zone and flood risk
• Home age and construction
• Coverage limits
• Deductible level

In many cases, you are required to pay your flood insurance premium upfront and in full each year. However, if you add a flood insurance endorsement to your existing home insurance policy, the premium will likely be added to your home insurance premium, which you can pay on a monthly basis.

How to lower the cost of flood insurance

While flood insurance can be expensive — in some high-risk states, it is more expensive than the average home insurance policy — the Risk Rating 2.0 system is expected to lower the cost of flood insurance for nearly a quarter of NFIP policyholders. You may also be eligible for a discount if your community participates in the FEMA Community Rating System. This means that your community has created flood management programs beyond the NFIP requirements.

There are other steps that may help lower your premium, whether you obtain a policy from the NFIP or a private carrier. It may be possible to lower your premium by:

• Adjusting your policy limits and deductible
• Providing an annual elevation certificate
• Retrofitting your home to minimize damage in the event of a claim

Additionally, requesting a quote for flood insurance coverage from more than one carrier or adjusting the policy limits could help you find a flood insurance policy that falls within your budget.

Frequently asked questions