Here's something that catches thousands of homeowners off guard every year: your homeowners insurance doesn't cover floods. Not even a little bit. When water rushes into your home from heavy rain, storm surge, or an overflowing river, your standard policy won't pay a dime. That's where flood insurance comes in—and depending on where you live, it might not be optional.
Floods are the most common and expensive natural disaster in the United States, yet only about 4% of homeowners have flood insurance. If you live in a coastal area or near a river, understanding your flood insurance options isn't just smart—it's essential. Let's break down what you need to know.
Why Your Homeowners Policy Won't Help
Standard homeowners and renters insurance policies explicitly exclude flood damage. That means if water enters your home from the ground up—whether from a hurricane, heavy rainfall, melting snow, or a nearby body of water overflowing—you're on your own without flood coverage. This surprises many people, especially since over half of U.S. homeowners don't realize flooding isn't covered under their regular policy.
The distinction matters. If a pipe bursts inside your home, that's typically covered by homeowners insurance. But if rainwater floods your basement or storm surge pushes seawater into your living room, you need flood insurance. The insurance industry treats flooding as a catastrophic risk that requires specialized coverage.
Your Two Main Options: NFIP vs. Private Flood Insurance
The National Flood Insurance Program (NFIP)
NFIP has been the backbone of flood insurance since 1968, currently providing over $1.3 trillion in coverage to 4.7 million policyholders. The program offers up to $250,000 in building coverage and $100,000 in contents coverage. Average premiums run about $75 per month, though your actual cost depends on your specific flood risk under their Risk Rating 2.0 system, which considers factors like your property's elevation, distance to water, and reconstruction cost.
The major advantage of NFIP is federal backing—even in catastrophic flood years, the program can't go bankrupt. The downside? Coverage limits that may fall short for higher-value homes, and a mandatory 30-day waiting period before coverage begins. Starting in late 2024, NFIP also offers monthly payment plans, making premiums more manageable.
Private Flood Insurance
Private flood insurance has grown dramatically, jumping from 41 companies in 2019 to 58 by 2020. These policies average $98 per month but can be significantly cheaper than NFIP for properties in low to moderate-risk areas. For example, a home in Charleston's AE flood zone might cost $3,000 annually through NFIP but only $800 to $1,500 with a private carrier.
Private insurers typically offer higher coverage limits—up to $1 million or more—making them ideal for expensive homes. They also provide more flexible coverage options, faster claims processing, and shorter waiting periods of 15 days or less (sometimes immediate). The trade-off is that private insurers can be more selective about which properties they'll cover and may adjust rates more frequently based on risk.
Who Actually Needs Flood Insurance?
If you have a federally backed mortgage and live in a high-risk flood zone (designated Zone A or Zone V on FEMA flood maps), flood insurance isn't a choice—it's mandatory. Your lender will require it as a condition of your mortgage. High-risk zones are areas with at least a 1% chance of flooding in any given year, which translates to a 26% chance over a 30-year mortgage.
But here's the kicker: nearly one-third of all flood insurance claims between 2014 and 2024 came from properties outside high-risk zones. Properties in moderate-to-low risk areas can flood too, and when they do, the average claim payment is around $68,000. That's a lot to pay out of pocket because you assumed you were safe.
You can check your property's flood zone at FEMA's Map Service Center. Even if you're not required to have coverage, consider this: flood insurance in lower-risk zones is typically more affordable, and it protects you from a financial disaster that standard insurance won't touch.
What Flood Insurance Costs and Covers
The average annual cost of flood insurance runs about $700, but this varies wildly based on your location, flood risk, coverage amount, and whether you go with NFIP or private insurance. Premiums in high-risk coastal areas or flood plains will be higher than inland properties with minimal flood history.
Your policy typically covers structural damage to your home, including the foundation, electrical and plumbing systems, HVAC equipment, appliances, and permanently installed items like cabinets. Contents coverage (which you purchase separately) protects your personal belongings—furniture, clothing, electronics, and other possessions.
When disaster strikes, the average NFIP claim pays out about $33,905, though payouts range from minor to hundreds of thousands depending on damage severity. From 2016 to 2023, the average insurance payout for water damage through NFIP was $66,000. Given that most people don't have that kind of cash sitting around, flood insurance becomes less of an expense and more of a necessity.
How to Get Started
First, check your flood zone using FEMA's Flood Map Service Center to understand your baseline risk. Then get quotes from both NFIP (through any insurance agent who sells it) and private insurers. Compare not just the price, but coverage limits, waiting periods, additional coverage options, and claims handling reputation.
Don't wait until hurricane season or when storms are forecast—remember that waiting period. If you're closing on a home purchase in a flood zone, coordinate with your lender and insurance agent early to ensure coverage is in place at closing.
Flood insurance might seem like just another bill, but when water is pouring into your home, that policy becomes the difference between financial recovery and financial ruin. Whether you choose NFIP or private coverage, having flood insurance means you're protected from a gap in your homeowners policy that could otherwise cost you tens of thousands of dollars. Take the time to explore your options now, before you need them.
