Flood Insurance

Be Financially Afloat

There are many things you can’t control, and the occurrence of a flood is definitely out of your hands. However, you can control a flood’s effect on your financial standing through flood insurance.

In this article

What is Flood Insurance?

Flood insurance protects you from property losses due to floods caused by prolonged or heavy rain, snowmelt, coastal storms, etc. However, in insurance, it is considered a flood only if:

  • The water covers two or more acres of land or,
  • The water flow affects at least two properties.

Which Flood Zone Do You Fall In?

Flood risks change over time due to new constructions, changing weather patterns, etc. Therefore, the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP) continuously map flood risks and publish community flood maps. The flood maps categorize areas in the U.S. into various flood zones:

Special flood hazard area (SFHA)

SFHAs are high flood-risk zones and are usually denoted by a V or A on flood maps. V zones are most susceptible to flooding, followed by A zones. Flood insurance is mandatory in these zones due to their high level of risk.

Moderate to low-risk area

The probability of floods in these areas is substantially less than in a high-risk area. Flood insurance is not mandatory in this region.

Undetermined risk area

These areas are not analyzed for flood risks. However, that doesn’t imply undetermined risk areas are flood risk-free zones. Rather, the cost of flood policies in these areas is hard to specify. A majority of the U.S. fall under this category. 

Don’t let a flood sweep your finances away.

Why Do You Need Flood Insurance?

Statista reports that floods in the U.S. caused around $3.75 billion worth of economic damage in 2019 alone. According to the NFIP, an inch of floodwater may result in damage of up to $25,000. Among all the natural disasters in the U.S., 90% involve flooding.  

Your homeowners insurance policy will not cover flood damages and floods do happen frequently in low or moderate risk areas. The data reflects the high severity and probability of flood risks, stressing the importance of having a flood insurance policy in place.

Moreover, if your home or business is located in a high flood-risk area and is backed by a government mortgage, you are federally required to have a flood insurance policy. Other mortgage lenders may also require you to have the policy to protect their investment. 

how much does flood insurance cost

Coverages of Flood Insurance

Flood insurance offers the following coverages:

Building structure

Flood insurance covers you from loss of damage to the physical structure of the building. The coverage limit is $250,000 for residential structures and $500,000 for commercial buildings.

Moderate to low-risk area

Your flood policy covers a detached garage. The coverage limit can be up to 10% of your building coverage amount. However, the detached garage coverage amount is subtracted from the total amount of building coverage.

Personal property

A flood policy can provide coverage for personal property inside your home, such as furniture, television, clothing, microwave, etc. However, if such property is stored in the basement during the loss event, your insurer may not provide compensation.

Carpeting and windows

From carpeting to windows, flood insurance offers a wide range of protection. If you have installed carpeting permanently or use any carpets, damage to carpeting falls within the insurance coverage scope. Furthermore, the policy also covers damage to curtains and window blinds.


Flood insurance can cover events such as mudflow and groundwater seepage, which are direct results of a flood. For instance, your neighbor’s swimming pool collapses and floods your home, resulting in damages to walls and flooring. Such losses are compensated under flood insurance.

A flood policy may offer coverage to:

  • Appliances such as refrigerators, dryers, washing machines, freezers, etc.
  • Fuel tanks, water tanks, solar energy equipment, etc.
  • Cabinets, panels, and bookcases
  • Foundation walls
  • Valuable items, such as fine arts, fur, etc.

Don’t let a flood sweep your finances away.


Flood insurance does come with some exclusions:

Internal water damage

Flood insurance does not cover losses due to water damages originating within a building—for example, if a burst water pipe in your home causes a flood and damage to your personal property. Instead, homeowners insurance may cover such losses.

Temporary living expenses

A flood event may make your home uninhabitable to live in. In such a circumstance, you’d need to rent a different living space until the building is repaired. That calls for additional living expenses that your insurer may or may not cover. Make sure to check your policy carefully.

Earth movement

Any damage caused by earth movements like earthquakes or landslides falls out of the scope of flood insurance coverage. Remember that even if the earth movement is caused by a flood, the resulting damage is not covered.

Business interruption costs

In addition to property repair costs, damages to your office space will also result in a loss of business income if the property is unusable. While your insurer may compensate you for the office building’s physical damage, you may need to bear the loss of business income. If you have business interruption insurance it may cover income loss due to a flood so it’s important to check your policy.

Avoidable loss

Flood insurance covers you from flood-related losses. However, if you could have prevented the loss but failed to do so, the insurance will not compensate you for such a loss. For instance, if following a flood you fail to properly clean and dry your property, it may become damaged due to moisture, mold, or mildew. Since you could have avoided such damages, this property would be excluded by your flood policy.

Outlier properties

The policy excludes property lying outside the insured premise. Such property can be trees, decks, hot tubs, patios, swimming pools, etc.

Get a better understanding of the coverages and exclusions through your insurance provider. You can also request additional coverages to be added to your standard flood policy.

what is flood insurance

Cost of Flood Insurance

Various factors affect your flood insurance premium:


The location of your place of business or residence significantly affects your insurance premium. Before you purchase a flood policy, understand whether you are located in SFHA or a less risky zone.


The coverage can be either a replacement cost value (RCV) or an actual cash value (ACV).

  • RCV

Under RCV coverage, you get the compensation equal to the cost of repairing or replacing insured property, without deducting wear and tear expenses.

  • ACV

ACV coverage reimburses you for any repairs or replacement of insured property after deducting depreciation costs. Hence, the reimbursement depends on the age and condition of the insured property. ACV coverage is less costly than RCV coverage.

Design and age

If your home has a high-valued structure design, the probable severity of the loss is naturally high which will increase your insurance cost. On the other hand, a newer building is more likely to withstand flood-induced damage than an older building. Therefore, the cost of the former is lower.


As a rule of thumb, if you agree to a higher deductible after the loss event, your premium decreases. A deductible is an amount you pay following an insured event. The insurer deducts the deductible amount from the total claim settlement amount and pays out the remaining amount.

Don’t let a flood sweep your finances away.

Best Place to Get A Flood Policy

Flood coverage programs are different in the U.S compared to the rest of the world. In many countries, it’s more typical for insurers to underwrite flood insurance. While in the U.S. the government underwrites flood policy and the insurers sell or administer them, bearing no flood-related risks. Therefore, you can opt for a flood policy either from the NFIP or a private insurer. Before you make the decision, here are key points you need to know:  

  • The NFIP excludes additional living expenses following damage to your property due to a flood. For example, rental costs for a residence while your home is being repaired would not be covered. However, private insurers may offer coverage to compensate you for such expenses.  
  • While policies offered by both the NFIP and private insurers cover your real property under ACV coverage, only private insurers cover your personal property under RCV coverage.  
  • The NFIP strictly excludes property in basements. On the other hand, a private insurer can provide you full coverage for the same.  
  • The coverage limits under the NFIP flood policy are $100,000 for contents and $250,000 for dwellings. However, you can get coverage equal to the value at risk from private insurers. 

What amount of flood insurance coverage do I need?

Your flood insurance requirement is guided by where your home is located and the associated flood zone’s risk level.

Don’t let a flood sweep your finances away.