Flood Insurance: What It Costs and What It Covers

Many Americans don’t need to wonder if they need flood insurance — if you live in a high-risk area, you may not be able to get a mortgage without it. But even if flood insurance isn’t required for your property, it might still be a good idea.

Most home insurance policies don’t cover flood damage, which can amount to tens of thousands of dollars even if you get only an inch or two of water. Flood policies in moderate- to low-risk areas could cost less than your monthly cell phone bill, so if you can afford the coverage, it may be worth it.

What is flood insurance?

Flood insurance covers damage to your home due to various types of “inundation,” such as a river that overflows its banks, a hurricane storm surge or a heavy downpour that accumulates faster than it can drain. Because flood coverage isn’t included on most homeowners, condo, renters or mobile home insurance policies, you’ll likely need to purchase this coverage separately if you’re at risk.

» MORE: What to know about the National Flood Insurance Program

What does flood insurance cover?

Most flood policies, even if you buy them through a private company such as Allstate or Liberty Mutual, are actually underwritten by the National Flood Insurance Program. These policies feature two standard types of coverage, each with a separate deductible:

• Building coverage, which pays for damage to things like electrical and plumbing systems, water heaters, furnaces, foundation walls, built-in appliances and permanently installed cabinets. You can purchase coverage up to $250,000.

• Contents coverage, which pays for damage to items such as clothing, furniture, artwork, curtains, washers and dryers. This coverage is limited to $100,000.

The NFIP’s contents coverage is provided on an “actual cash value” basis, meaning that you’ll receive a payout based on an estimate of what your belongings are worth at the time of the flood. For example, say the floodwaters damage your 15-year-old recliner beyond repair; your policy will pay enough to buy a used recliner of similar age and quality — not enough for a brand-new one.

You may be able to get broader coverage and higher limits by purchasing flood insurance through companies that don’t work with the NFIP. For example, Neptune offers building coverage up to $2 million and contents coverage up to $500,000.

What doesn’t flood insurance cover?

The NFIP pays for damage only when naturally occurring flooding affects at least 2 acres of land and a minimum of two properties. That means it won’t cover scenarios such as an overflowing bathtub that floods your bathroom. (These issues may be covered by your homeowners insurance.)

Even if you find yourself in a flooding situation defined by the NFIP, the policies have gaps. For example, damage to any of the following items isn't covered:

• Swimming pools.

• Decks.

• Patios.

• Landscaping.

• Valuable papers.

• Currency.

• Personal belongings in your basement.

If you need to move into a hotel or a rental apartment while your home is repaired after a flood, you’ll have to pay those expenses yourself.

Cars and other “self-propelled vehicles” are also excluded from NFIP insurance, but if you’ve got comprehensive insurance on your auto policy, you should be covered for flood damage.

Private insurers tend to offer more coverage options and fewer exclusions. For instance, both Neptune and Aon Edge can cover some expenses if you need to move out of your home during repairs and pay out for swimming pool repairs or cleanup.

» MORE: The best homeowners insurance companies

Do I need flood insurance?

Homeowners in high-risk flood zones are required to purchase flood insurance in order to get a federally backed mortgage. If you’ve received FEMA grants or other assistance in the past, you must have flood insurance to be eligible for any future federal disaster aid.

If having flood insurance isn’t a condition of your mortgage, you’re not obligated to carry it. However, even a minimal amount of flooding can have disastrous financial consequences.

One foot of water could cause more than $29,000 in damage to a 1,000-square-foot home, and the average claim payout was $52,000 in 2019, according to the NFIP. More than 40% of NFIP claims between 2014 and 2018 came from policyholders outside of high-risk flood areas. You can use the program's tool to estimate how much a flood might cost you based on the size of your home.

That said, if you live in a low-risk zone, you might want to weigh the cost of coverage against the likelihood of having to file a claim. If your area has never sustained serious damage and you’re thinking of skipping flood insurance, consider setting aside money for repairs.

Some states, including Mississippi and South Carolina, also allow residents to place their emergency funds in Catastrophe Savings Accounts that are exempt from state income tax. Federal taxes still apply, and disbursements would be taxed as normal if withdrawn for purposes other than disaster repairs.

» MORE: How to get money if you don’t have flood insurance

How much is flood insurance?

The average flood insurance cost is $732 a year, according to NerdWallet’s analysis of 2020 NFIP rates. (This figure doesn't take into account policies purchased through companies not backed by the NFIP.)

Flood insurance for renters can be much cheaper if you need to cover only your personal belongings. The NFIP advertises rates as low as $99 a year for contents-only coverage.

Below is the average cost of flood insurance in each state, according to the most recent data from NFIP. Your own rate could vary significantly based on your property’s flood risk and the amount of coverage you need.

How to get flood insurance

If you plan to purchase flood insurance, you have several companies to choose from. The NFIP works with more than 60 different insurers to sell its policies, so you may be able to get flood insurance from the same company that offers your existing auto or homeowners coverage. You must live in one of the 24,000-plus communities that participate in the program in order to buy an NFIP policy. (Here's a list of participating communities.)

If NFIP insurance isn’t available in your area, you’ll have to go through a private company selling its own flood insurance policies. In fact, their premiums may undercut the NFIP’s, so it’s smart to gather quotes before committing to a flood insurance policy.

Don’t wait until a hurricane is barreling down on your home to get covered. There’s typically a waiting period between when you purchase flood insurance and when the coverage takes effect. For NFIP policies, the waiting period is usually 30 days, while other policies can have shorter periods of 10 to 15 days.

If you live in a high-risk area, you may need to provide your insurer with an elevation certificate before it can determine your premium. This document includes the lowest floor elevation of your home, which the insurer will use to determine your home’s flood risk.

» MORE: How to choose the best flood insurance company

How to save on flood insurance

Once you’ve decided on a flood insurance carrier, there are ways to shave a bit off your premium. Some home improvements, such as elevating your heating, cooling or electrical systems or installing flood vents, can lower both your premium and risk of flooding.

You can also choose to have a higher deductible or lower coverage limits. Agreeing to pay more in the event of a claim will help you manage your premiums — just be sure you can afford to come through with the cash if needed.

» MORE: Flood insurance claim denied? Don’t panic; appeal