Flood Insurance: What It Costs and What It Covers

Key takeaways

• Flood damage isn’t covered by most homeowners or renters policies, so those at risk need separate flood insurance.

• Flood insurance covers the structure of your home and personal belongings.

• Nationwide, the average cost of flood insurance is about $771 a year, but this is increasing under a new pricing methodology from the Federal Emergency Management Agency.

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 to have it.

Most home insurance policies don’t cover flood damage, which can amount to tens of thousands of dollars even if there's just 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 underwritten by the National Flood Insurance Program, or NFIP. These policies feature two standard types of coverage, each with a separate deductible:

• Building coverage. 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. 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 $4 million and contents coverage up to $500,000. Learn more about private flood insurance.

» MORE: Hurricane prep list: What to do before a storm

What doesn’t flood insurance cover?

The standard NFIP policy won’t pay for certain expenses, including:

Some water damage

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.)

Damage to certain parts of your home

The NFIP won’t pay for flood damage to any of the following:

• Swimming pools.

• Decks.

• Patios.

• Landscaping.

• Valuable papers.

• Currency.

• Personal belongings in your basement.

Living expenses if you’re displaced

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

Vehicles

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. They both also 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 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. You can use the NFIP’s tool to estimate how much a flood might cost you based on the size of your home.

The NFIP’s average claim payout has been more than $37,000 through April in fiscal year 2022, according to the NFIP. About 40% of NFIP claims from 2015 to 2019 came from policyholders outside of high-risk flood areas.

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 any possible 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 in the U.S. is $771 a year, according to NerdWallet’s analysis of 2022 NFIP rates. (This figure doesn't take into account policies purchased through companies that aren't backed by the NFIP.) Flood insurance for renters can be much cheaper if you need to cover your personal belongings only. The NFIP advertises rates as low as $99 a year for contents-only coverage.

Below are the average flood insurance rates for each state.

However, these rates are changing. Starting on Oct. 1, 2021, FEMA began using a new methodology called Risk Rating 2.0 to set its premiums. Designed to price flood insurance more equitably, the methodology uses additional variables such as flood frequency and rebuilding cost to evaluate each home’s chance of flooding.

Those buying a new flood insurance policy will pay the new rates immediately. Existing policyholders whose rates are set to increase will see the higher premiums with their next renewal.

The agency says that flood insurance premiums dropped for about 23% of existing policyholders under the new methodology, while everyone else will pay the same or more. In most cases, federal law prevents your premium from increasing more than 18% in any given year.

Because of this cap, some policyholders may see their premiums rising year after year until their rate reflects what FEMA sees as the property’s true risk. The agency estimates that about 50% of primary residential policies will have reached their full risk rate after five years of increases, according to a recent report to Congress

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» MORE: The average cost of homeowners insurance

What affects your flood insurance cost?

A number of factors determine how much you’ll pay for flood insurance.

Your home’s location and characteristics

Under Risk Rating 2.0, FEMA looks at not only which flood zone your home is in but also how likely your individual property is to flood. For example, how close is the house to a river or other flood source? How much would it cost to rebuild your home? How high is the first floor? How frequently does this area flood?

Together, these and other factors determine how likely your home is to be damaged in a flood. In general, the higher the risk, the more you’ll pay for flood insurance.

Your community

If you live in a place that takes certain steps to lessen its risk of flood damage, you could be eligible for a discount on your flood insurance. This could include things like managing stormwater, maintaining levees and requiring real estate agents to disclose when a property is prone to flooding.

Your deductibles and coverage

Choosing a higher deductible — the amount of a claim you pay yourself — will generally lower your premium. Opting for a lower deductible or higher coverage amounts will usually increase what you pay.

Where you buy your policy

The NFIP isn’t the only game in town when it comes to flood insurance. You may see different rates if you shop around with one or more private flood insurers.

How to get flood insurance

If you plan to purchase flood insurance, you have several options. The NFIP works with more than 50 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. Even if you do have access to NFIP insurance, you may be able to get lower premiums from a private insurer, so it’s smart to gather quotes before committing to a 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 14 days.

You may want to provide your insurer with an elevation certificate to see if it might help lower your premium. This document includes the lowest floor elevation of your home, which the insurer will use to determine your home’s flood risk. FEMA previously required elevation certificates in order for some property owners to get coverage, but this is no longer the case under Risk Rating 2.0.

You can get an elevation certificate from your local floodplain manager or hire a land surveyor or engineer to complete one for you.

» MORE: How to get the best flood insurance

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 installing flood vents or elevating your heating, cooling or electrical systems on platforms, can lower your premium and risk of flood damage.

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 premiums — just be sure you can afford to come through with the cash if needed.

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