Flood Insurance for Homeowners

Does homeowners insurance cover flood damage?

Damage caused by flooding is generally excluded from standard homeowners insurance policies. Flood insurance is typically sold as a separate insurance policy that homeowners will need to purchase to supplement their existing homeowners insurance policy; this will specifically provide water damage coverage stemming from flood events.

Homeowners insurance only covers general water damage under specific circumstances, including incidents like a burst pipe, overflows via malfunctioning appliances and vandalism. Water damage caused by events such as storm surges would need to be deferred to a flood insurance policy. Learn more about how homeowners insurance handles routine water damage.

Floods can cause catastrophic destruction and wipe out entire communities — in fact, flooding is the most prevalent natural disaster in the United States. It may be surprising just how much damage even a few inches of water can inflict on your personal belongings and property. Let’s examine the basics of flood insurance for homeowners and how it can be integral in the event of a flood-related loss.

Table of contents: flood insurance as a homeowner

1. Do I need flood insurance?
2. Where can I get flood insurance?
3. What does flood insurance cover?
4. NFIP vs. private flood insurance
5. How much does flood insurance cost?
6. Flood insurance: summarized

Is flood insurance necessary?

Flood coverage is compulsory if you live in a high-risk flood zone and your mortgage lender requires it to meet a legal mandate. Because they have a financial stake in the well-being of your home, the lender will want the extra protection provided by a flood insurance policy. In some cases, lenders will require it if even if there is no legal mandate to carry flood insurance.

Insurance protection for flooding is not required if your home’s location is at moderate or low risk of flood damage. However, it may still be a sound decision to enroll in flood coverage even if you don’t live in a high-risk area. Every state in the US has experienced floods at some point, and according to the Federal Emergency Management Agency (FEMA) 20% of flood insurance claims occur in low- to moderate-risk states.

Does homeowners insurance cover water damage from flooding?

A standard homeowners insurance policy does not cover water damage from flooding and natural disasters, like hurricanes. Homeowners must carry a separate flood insurance policy in order to get coverage.

Insurance only covers water damage from specific sources; this should be outlined in your home insurance policy. Some examples are:

• Burst pipes and other plumbing issues and malfunctions
• Damage from snow or rain
• Accidental overflow from a malfunctioning appliance, like a water heater or sump pump
• Water seepage from a roof leak
• Vandalism

If you don't plan on getting flood insurance but want extra protection, an endorsement for sewer backup will provide coverage for water damage that occurs as a result of backups in your plumbing.

Where to get flood insurance

The majority of flood policies are written by FEMA’s National Flood Insurance Program (NFIP), though a small number of private insurance companies offer flood coverage as well.

The National Flood Insurance Program (NFIP)

NFIP policies can be acquired through insurance companies and insurance agents. For example, a homeowner can purchase flood insurance through an insurance company like GEICO or Progressive, but they simply act as the middleman — the coverage itself is provided through the federal government. If you’re already a policyholder with a homeowners policy and need flood insurance, your current insurer may be able to provide NFIP coverage.

The NFIP also offers flood insurance for renters to supplement renters insurance policies.

FEMA Write Your Own Flood Insurance (WYO)

FEMA backs a number of private insurance companies, allowing them to write and offer flood coverage under their own name. While it gives these companies some autonomy, carriers that fall under the Write Your Own (WYO) flood insurance program still depend on the government for funds through reinsurance.

Private flood insurance

It’s not commonly available via most home insurance companies, but private flood insurance can be found via some smaller, regional insurers. In general, private flood policies tend to have higher coverage limits and some additional benefits that may not be available through the NFIP.

Flood insurance coverage: what does it cover?

Coverage through the National Flood Insurance Program is usually the default option for most homeowners, and there is a 30-day waiting period before your policy takes effect. Some private insurers may waive or shorten the waiting period.

A flood policy through the NFIP includes:

• Building coverage: $250,000 limit on replacement cost or actual cash value basis, whichever is less. On top of coverage for the building and its foundation, it also covers permanently installed appliances and features including central air conditioners, carpeting, water heaters, dishwashers, electrical and plumbing systems, bookcases, wallboard, paneling and window blinds.
• Contents coverage: $100,000 limit for personal property on an actual cash value basis.
• Valuables coverage: $2,500 for fine art, jewelry and collectibles.
• Separate deductibles for building and contents coverages.

The NFIP does not cover:

• Living expenses if you’re forced out of your home, also known as additional living expenses.
• Preventable wear-and-tear or gradual damage from moisture or mildew (including mold damage) and damage from seepage or sub-surface water flow.
• Exterior property and belongings like trees, plants, shrubs, decks, patios, fences, and pools.
• Vehicles and vehicle parts — see more info on flooding and auto insurance.
• Currency, precious metals and paper valuables.

If you acquire flood insurance through the NFIP, it’s important to understand exactly what it covers, how much it covers and also its limitations if you ever need to file an insurance claim. For instance, if your home is valued at $400,000 to rebuild and you have a hot tub in the backyard, the NFIP’s building coverage would not be sufficient to replace your home and your hot tub will be excluded from replacement in the event of a flood.

NFIP vs. private flood insurance: what’s the difference?

The NFIP is the go-to option for most homeowners, but if the value of your home and belongings surpass the limits of $250,000 and $100,000, respectively, you may need to look for excess flood coverage by way of private insurers. You have the option of carrying both NFIP and private flood insurance or choosing one private carrier for all of your flood coverage needs.

Pros and cons of private flood insurance

If you have valuable assets and live in a high-value home, you may need to look for a private flood insurance policy. Here are the key pros and cons to keep in mind if you’re considering going with a private insurance company.

Pros:

• Cognizant of the NFIP’s coverage limits, private flood insurers typically offer much higher limits for clients who live in more expensive homes and have assets to protect. Dwelling coverage limits can tread well into the multi-millions.
• A short waiting period or no waiting period at all before the policy is active.
• The ability to upgrade to replacement cost for contents coverage (this covers water damage to personal property).
• Increased coverage for other structures like sheds, detached garage, etc.
• Expanded benefits like additional living expenses and reimbursement for loss of income.
• A single private flood policy may be cheaper than paying for both NFIP and private flood coverage.

Cons:

• Private insurers set their own rates as opposed to the NFIP’s, which are set by the government. Premiums may vary considerably from company to company.
• No financial backing from the federal government, which may be risky if the company is not financially stable.
• They may or may not meet your lender’s flood insurance requirements.
• Even during a flood risk, the policy may be voided or canceled at the insurer’s discretion; the NFIP does not issue non-renewals especially when a flood event is expected.

How much does flood insurance cost?

The average annual cost of flood insurance through the National Flood Insurance Program rose from $990 to $1,080 (including all surcharges and fees) in 2021 — an increase of 9%.

The cost of flood insurance through the NFIP is determined by a number of factors:

• Location and flood zone
• The amount and type of coverage
• Age and design of the home
• For special flood hazard areas, the elevation of the insured building

Due to these rating factors, the rate you pay for flood coverage will vary — as is typical of the insurance world. Generally, homeowners who live in riskier areas — like along the coast — can expect to pay more expensive premiums due to the elevated risks of flood-causing natural disasters. Look up if your home is located in a flood zone at FEMA's flood map service center.

If your property's flood zone designation begins with the letters B, C or X, your home is a moderate- to low-risk for flooding and could qualify for Preferred Risk Policies (PRPs) — or lower-cost flood insurance. Those who live in flood zones A or V are high-risk areas and will be required by their lender to get flood coverage. Whether your home is pre-FIRM or post-FIRM (FIRM stands for Flood Insurance Rate Map) will also be a factor in what you pay:

• Pre-FIRM buildings are those that were constructed or improved upon on or before December 31, 1974. This means that it was built before flood hazard data and regulations existed, and therefore were not built with the risks of flooding in mind.
• Post-FIRM buildings are homes that were built after December 31, 1974, so they were constructed after the implementation of the first Flood Insurance Rate Map.

The table below displays average monthly costs for pre-FIRM, post-FIRM and Preferred Risk Policies:

Beginning in October 2021, FEMA will phase in a new NFIP price-setting method called Risk Rating 2.0. This new procedure could lead to rate increases for up to 4% of policyholders in 2021 and 2022.

Flood insurance for homeowners: summary

Flooding is a natural disaster that’s often an accessory to hurricanes, heavy rain and other severe weather events. But they can happen anywhere — regardless of what state you live in — if the conditions are right. Since standard homeowners insurance policies do not extend coverage for flood damage, having a flood insurance policy will save you time, money and heartache should one ever strike. Homeowners have the choice of a flood insurance program backed by FEMA or a private flood insurer if they have significant assets to protect. In some cases, it may be wise to enroll in both for excess flood coverage, especially if you live in a vulnerable floodplain. 

Get a flood insurance quote today from Neptune Flood Insurance.