National Flood Insurance Program: Buying Insurance

Houses in standing water during a flood.
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Regardless of where you live in the United States—whether it's the desert, by a lake, on the coast, in a 100-year floodplain, or atop a mountain—your home is a flood risk. Floods happen in every climate, at all elevations, and in all 50 states.

Who Needs Flood Insurance?

Since floods can happen to anybody just about anywhere, you probably should consider taking out a flood insurance policy. If you live in a high-risk flood area and buy a home with a loan backed by a federally insured mortgage, your lender will require that you buy flood insurance.

Where Can You Buy Flood Insurance?

If your community participates, you can purchase flood insurance from your insurance agent through the National Flood Insurance Program. This program is backed by the U.S. government. Note that a seller can also assign an existing flood insurance policy to a new buyer; it is freely transferable.

Does Homeowner Insurance Cover Flooding?

A standard homeowner's insurance policy does not cover flooding. You will need a separate flood insurance policy.

Your premiums will be much lower if the home has never had a flood claim. Here are three ways to find out if a home you want to buy has had a flood claim:

  • Order a C.L.U.E. Report. C.L.U.E. stands for Comprehensive Loss Underwriting Exchange. The report gives you a 5-year history of a home. Your insurance agent can obtain this report for you, you can buy a copy online, or you can order it in conjunction with a natural hazard disclosure report. C.L.U.E. Reports cost about $20. Homeowners must make the request and are entitled to one free report annually.
  • Ask for Seller's Disclosure or TDS. In many states, sellers are legally required to disclose previous property problems, and those disclosures include former flooding. Transfer Disclosure Statements (TDS) and Seller Property Questionnaire forms ask sellers to disclose that type of information.
  • Get a Home Inspection. A qualified home inspector can conduct a visual inspection of the home and look for signs of water damage or mold. Typically, contracts are contingent on a home inspection, which means buyers, if dissatisfied with the results of the inspection, have the right to demand the refund of their earnest money deposit and cancel the transaction.

You can also receive insurance discounts if your area participates in the Community Rating System (CRS).

How Do Floods Happen?

A flood, in layman's terms, is any sudden accumulation of water or mud in an area that ordinarily is not wet.

Many people believe floods occur because of hurricanes or tropical storms, but those natural disasters are not the sole causes. Some areas can also flood due to rising river waters, flash flooding from heavy rainstorms, or rapidly melting snow.

Continued tree removal, new subdivision construction, and paved parking lots and roadways mean there is less natural soil available to absorb water. Moreover, some residential developments are built on top of wetlands because the land is cheap. If water has no place left to sink into the earth, it will cause a flood.

Heavy rain can easily dump a couple of feet of water. In as little as 1 foot of water, some cars can float. Two feet or more can carry away even an SUV.

Flood Risk and 100-Year Floodplains

First, understand that if you live in a 100-year floodplain, it does not mean your chances of a flood are one in 100 years. It's a confusing term, but a 100-year floodplain assessment means a one-in-100 chance of a flood in any given year, or a 1% chance each year.

Ask your insurance agent to look at the region's flood maps to determine if your home is located in a floodplain and if so, find out the kind of floodplain and level of risk.

How Much Does Flood Insurance Cost?

The question really is how much does it cost not to have flood insurance. One inch of water can do considerable damage and run into tens of thousands of dollars to fix.

  • Coastal Policies: If you live on the coast, the premium will be high. You can insure the building and its contents to a maximum of $250,000, without previous claims, for about $6,000 a year. Renter's coverage for contents of only $100,000 is about $2,500.
  • High-Risk Policies: Without a previous claim, premiums are about $2,500 for $250,000 of coverage. Contents-only coverage of $100,000 is about $1,200. According to the government, in high-risk areas, 25% of homes flood during the term of a 30-year mortgage.
  • Preferred Risk Policies: $250,000 of coverage, without a previous claim, will run as low as $325 a year. Contents-only coverage of $100,000 is about $200. However, if the home has had a previous flood claim, that premium for $250,000 quadruples..

To find out the risk estimate for a premium on your property, go to FloodSmart.gov, visit the FEMA Flood Map Service Center, and enter your address.

Do not wait for a storm to approach before calling an insurance agent to get flood insurance. Most policies require a 30-day waiting period.

Article Sources

  1. FEMA. "FEMA Flood Map Service Center: Welcome!" Accessed Jan. 24, 2020.

  2. FEMA. "The National Flood Insurance Program." Accessed Jan. 24, 2020.

  3. FEMA. "Cost of Flood: Policyholders." Accessed Jan. 24, 2020.

  4. FEMA. "How Do I Buy Flood Insurance?" Accessed Jan. 24, 2020.

  5. Consumer Action. "Can I Receive and Correct My CLUE Report?" Accessed Jan. 24, 2020.

  6. HG.org Legal Resources. "Home Selling and Disclosure Requirements." Accessed Jan. 25, 2020.

  7. Realtor.com. "How to Get Out of a Contract When You Don't Want to Buy That House." Accessed Jan. 24, 2020.

  8. FEMA. "National Flood Insurance Program Community Rating System." Accessed Jan. 24, 2020.

  9. U.S. Geological Survey. "Effects of Urban Development on Floods." Accessed Jan. 24, 2020.

  10. FEMA. "Fact Sheet: Floods." PDF. Accessed Jan. 25, 2020.

  11. USDA Natural Resources Conservation Service. "Definitions of FEMA Flood Zone Designations." PDF. Accessed Jan. 24, 2020.

  12. FEMA. "Preferred Risk Policy for Homeowners and Renters." Accessed Jan. 25, 2020.