Insuring Your Home Through the National Flood Insurance Program

Make sure you're covered before the next flood hits.

A young couple looks over their options for flood insurance.

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Homeowner insurance covers many types of water damage, but one thing that isn't covered by most policies is flood damage. If a hurricane generates a storm surge that damages your home, you'll likely have to pay for flood-related repairs on your own.

As a homeowner, you can protect yourself by purchasing flood coverage through the National Flood Insurance Program (NFIP), administered by the Federal Emergency Management Agency (FEMA), or you can purchase flood insurance through more than 100 private insurers. You can also use a combination of both NFIP and private coverage to boost your coverage. Here's what you need to know about purchasing flood insurance, what's covered (or not), how much it costs, and what the options are.

Who Needs Flood Insurance?

Any property owner who wants to have coverage for damage caused by things like floods and hurricane-induced storm surges will need to buy a flood insurance policy. If you live in a high-risk flood area (Special Flood Hazard Area) and buy a home with a loan backed by a federally insured mortgage or lender, flood insurance is a requirement.

  • "High-risk" means that your property has at least a 1% chance of flooding every year.
  • "Low-" to "moderate-risk" means that your home has less than a 1% chance of flooding every year.

Despite the low risk, the National Association of Insurance Commissioners reports that more than 20% of claims are made by policyholders outside the mapped zones and FEMA reports that 40% of NFIP claims come from those in other than high-risk zones. These numbers are significant. Although not all mortgage lenders will require coverage when you are not high-risk, some still might. 

Floods are the most common natural disaster occurring in all 50 states, yet 85% of homeowners don't have flood insurance coverage.

Considering that the average amount paid for a flood claim by the NFIP in 2018 was $42,580, flood insurance is a good safeguard against unnecessary financial hardship to consider when you own a home.

Basics of an NFIP Flood Policy

The NFIP provides flood insurance to property owners and renters living in participating NFIP communities. There are 23,000 participating communities in the U.S.

An NFIP policy provides coverage for the building structure and also offers the option to buy personal property coverage. Unlike a homeowner policy, the two coverages don't come as a package deal. You purchase the coverage separately and each has its own deductible. NFIP coverage is limited, here are the limits and basis of claims settlement for each coverage:

  • $250,000 limit on the building, covered on a replacement cost basis
  • $100,000 limit on personal property, covered on an actual cash value basis

How an NFIP Claim Works

If you have an insurance claim with the NFIP, you should call your insurance agent right away to report the claim. You can also contact the NFIP at 800-427-4661.

The next step will be to file the notice of loss (a prompt written notice of flood-related damage) with your insurance company. An insurance adjuster will typically contact you within one to two days of you reporting the claim and set an appointment to visit your property. At the visit, he or she will survey the damage and prepare an estimate of how much it will cost to repair the damage.

If needed, you can ask the adjuster for an advance or partial payment so that you do not have to wait until the claim is settled and you can start recovery. This will require proof of loss of information, and additional paperwork.

The NFIP Claims Handbook is an excellent resource you can use to educate yourself on the important aspects of the program. It contains 12 pages of easy-to-understand tips and advice.

What's Not Covered by NFIP Flood Insurance?

NFIP flood insurance is a supplementary policy, which means it doesn't provide a lot of extra benefits outside of repairs for flood damage. Here are examples of added benefits and coverages that your NFIP policy will not cover:

  • Temporary housing and additional living expenses during flood repairs
  • Sewer back-up (if not caused by flooding)
  • Damage to outdoor property like swimming pools and decks
  • Personal property you keep in your basement

Where Can You Buy Flood Insurance?

To buy flood insurance, contact your home insurance provider or an NFIP provider by visiting the FEMA site and searching for a provider here.

There is a 30-day waiting period before you will be covered by NFIP policies. If your home is damaged by a flood during the waiting period, your policy will not cover the damages.

If you want to purchase private flood insurance, start by asking your current insurance agent if they have any recommendations. You can also do an internet search for local providers of private flood insurance in your area or contact your state insurance commissioner's office.

A flood insurance application will require you to provide information that is different than a standard homeowner application. Expect to answer flood-related questions such as what your home elevation is, among other information.

How Much Does Flood Insurance Cost?

The average cost of flood insurance for a homeowner through the NFIP was $700 in 2019.

Homeowners in lower-risk areas can qualify for Preferred Risk Policies (PRP), these start at $325 per year. People who have properties in high-risk areas and flood zones will pay higher premiums. Flood insurance is also available for renters, a renter's flood insurance policy with the NFIP starts at $99 per year. 

The following factors can influence your annual premium:

  • Your level of flood risk 
  • If you purchase building or contents coverage
  • Your choice of deductible, for example, if you are able to increase your deductible to $10,000 on your flood insurance it could save up to 40% on your premium.
  • The location, elevation, design, and age of your structure
  • For contents, the location where the contents are located in the structure
  • If you have previous claims or not
  • if your community participates in the Community Rating System (CRS).

More than 20% of flood claims come from non-high-risk areas. If you live a lower risk area that qualifies for a PRP, FEMA states that coverage can start for as little as $325 a year.

Private Flood Insurance vs. FEMA Flood Insurance

In 2019 federal regulators allowed mortgage lenders to accept private flood insurance in addition to NFIP insurance. This created greater opportunity and competition among insurers, allowing consumers more options to choose from. As of the latest data, there are 140 private insurers offering flood insurance.

Private flood insurance offers higher limits of coverage, it can be less expensive than NFIP policies and has shorter waiting periods than the NFIP.

Private Flood Insurance vs. NFIP
Coverage Feature Private NFIP
Waiting Period 7-14 days 30 days
Building Coverage Up to $5 million (or more) $250,000 maximum
Personal Property Coverage Usually a percentage of the building, therefore, amounts above $100,000 are possible. $100,000 maximum
Basis of Claims Settlement Choices of replacement cost or actual cash value depending on insurer Replacement cost on the building or actual cash value on personal contents
Additional Living Expenses May be available, depending on the insurer Not covered
Comparison of Private Flood Insurance and NFIP Policy Features

Regardless of whether you are required to buy flood insurance or not, your home represents a significant investment and all homeowners should consider purchasing flood insurance since damages by flood are not covered by standard home insurance. The cost of water damage repairs can be very expensive, consider that just one inch of water can cause $25,000 of damage. You can protect the investment in your home and avoid financial hardship by investing in a flood insurance policy through the NFIP or through a private insurer.

Flood Insurance vs. Federal Disaster Assistance

The average flood insurance claim in 2018 was more than $40,000. You may be thinking that if you have a flood and you don't have coverage, you can apply for federal disaster assistance instead. Consider that federal disaster assistance only provides a couple of options: a loan (that you have to pay back) or a FEMA disaster grant.

The average FEMA disaster grant is $5,000 per household. To qualify for FEMA there may also have to be a Presidential Disaster Declaration. You may qualify for some help from FEMA if the conditions are met, but a flood insurance policy does not require a Presidential Disaster Declaration, it does not require you to pay back a loan and will pay up to the policy limits while you just have to pay your deductible.

Key Takeaways

  • Homeowner insurance does not include coverage for a flood. If you want flood insurance you have to buy additional coverage.
  • Flood insurance is available through the NFIP, but also through private insurers.
  • NFIP will not cover temporary housing or additional living expenses while your home is repaired
  • Private Flood Insurance policies can offer more coverage and be less expensive with significantly shorter waiting periods than the NFIP
  • You can supplement an NFIP flood policy by buying Excess Flood Insurance through a private insurer to get more coverage