Most home insurance policies exclude flood damage, which can cost tens of thousands of dollars even if only an inch or two of water is present. Flood insurance policies in moderate- to low-risk areas may cost less than your monthly cell phone bill, so if you can afford it, it may be worthwhile.

What is flood insurance?

Flood insurance is a type of property insurance that protects your home from specific types of water damage. The National Flood Insurance Program, the nation's largest flood insurance provider, defines flooding as "an excess of water on normally dry land." Flood insurance covers the following scenarios:

• A river, lake, or bay that has burst its banks.
• A hurricane storm surge.
• A heavy downpour that collects faster than it can be drained.
• A mudflow.

Flood damage is not covered by most homeowners, condo, renters, or mobile home insurance policies. If your home is at risk of flooding, you will almost always need to purchase this coverage separately.

What does flood insurance cover?

The NFIP offers two types of flood insurance, each with its own deductible: building and contents.

Building coverage

Building coverage protects the structure of your home. (It's similar to having dwelling coverage on your homeowners insurance.) It covers flood damage to items such as:

• Plumbing and electrical systems
• Water heaters.
• Furnaces.
• Foundation walls.
• Built-in appliances and cabinets.
• Permanently installed carpets.
• Detached garages.
• Fuel and well water tanks.

The NFIP provides up to $250,000 in building coverage.

Contents coverage

Contents coverage, like personal property coverage on a homeowners or renters policy, pays for damage to your belongings. This includes the following on an NFIP policy:

• Clothing.
• Furniture.
• Electronics.
• Original work of art (up to $2,500).
• Curtains.
• Microwaves, washers, and dryers
• Air conditioners that are portable.

The content coverage provided by the NFIP is provided on an "actual cash value" basis. This means that if you file a flood insurance claim, your payout will be determined by an estimate of the value of your belongings at the time of the flood.

For example, if floodwaters destroy your 15-year-old recliner beyond repair, your policy will only pay for a used recliner of comparable age and quality, not a new one.

The contents coverage provided by NFIP policies is up to $100,000.

Flood insurance coverage beyond the NFIP

Purchase flood insurance from companies that do not work with the NFIP to get broader coverage and higher limits. Neptune, for example, provides building coverage of up to $4 million and contents coverage of up to $500,000. Get more information on private flood insurance.

What doesn’t flood insurance cover?

Certain expenses are not covered by the standard NFIP policy, including:

Some water damage

The NFIP only pays for damage when natural flooding affects at least 2 acres and at least two properties. That means it won't cover situations like a bathtub overflowing and flooding your bathroom. (This and other issues may be covered by your homeowners insurance.)

Damage to certain parts of your home

Flood damage to any of the following will not be covered by the NFIP:

• Swimming pools.
• Decks.
• Patios.
• Landscaping.
• Important papers.
• Currency.
• Personal items in your basement.

Living expenses if you’re displaced

If you need to stay in a hotel or rent an apartment while contractors repair your home after a flood, you will be responsible for those costs.

Vehicles

Although NFIP insurance does not cover cars or other "self-propelled vehicles," comprehensive insurance on your auto policy should cover flood damage.

Private insurers typically provide more coverage options with fewer exclusions. For example, Neptune and Aon Edge can cover some of your expenses if you need to relocate while your home is being repaired. They also pay for pool repairs and cleanup.

Do I need flood insurance?

Flood insurance is required for homeowners in high-risk flood zones in order to obtain a federally backed mortgage. If the federal government has provided you with grants or other flood assistance, you must have flood insurance in order to be eligible for future federal disaster assistance.

You are not required to carry flood insurance if it is not a condition of your mortgage. However, even minor flooding can have catastrophic financial consequences.

A 1,000-square-foot home could sustain more than $29,000 in damage from one foot of water. You can use the NFIP's tool to estimate the cost of a flood based on the size of your home.

According to the NFIP, the average claim payout has been more than $36,000 through June of fiscal year 2022. From 2015 to 2019, approximately 40% of NFIP claims came from policyholders living outside of high-risk flood zones.

If you live in a low-risk area, you should weigh the cost of coverage against the possibility of having to file a claim. If your area has never experienced significant damage and you are considering foregoing flood insurance, consider saving money for any potential repairs.

Some states, such as Mississippi and South Carolina, also allow residents to put their emergency funds in Catastrophe Savings Accounts, which are tax-free. Federal taxes continue to apply, and you may be subject to a state penalty tax if you withdraw funds for purposes other than disaster relief.

How much flood insurance do I need?

The amount of coverage required is determined by the size and structure of your home, as well as the value of your belongings. For example, if you live in a sprawling one-story ranch, you may require more coverage than if your home has two stories and half of your possessions are elevated above the reach of most floods.

A home inventory is a good way to assess the value of your belongings, and an insurance agent can help you figure out how much building coverage you need.

If the NFIP is insufficient, speak with your insurance agent about purchasing excess flood insurance to fill the gap. Private companies such as Wright and SWBC typically offer excess insurance.

You can also avoid the NFIP by looking for private flood insurance with higher limits.

How to get flood insurance

You have several options when it comes to purchasing flood insurance. The NFIP sells its policies through more than 50 insurers, so you may be able to get flood insurance from the same company that provides your auto or homeowners insurance.

To purchase an NFIP policy, you must live in one of the 24,000+ communities that participate in the programme. (A list of participating communities can be found here.)

If the NFIP is not available in your area, you must go through a private company that sells flood insurance policies. Even if you have access to NFIP insurance, you may be able to get lower premiums from a private insurer, so gathering quotes before committing to a policy is a good idea.

Don't put off getting insurance until a hurricane is bearing down on your home. When you buy flood insurance, there is usually a waiting period before the coverage kicks in. The waiting period for NFIP policies is typically 30 days, whereas other policies may have shorter periods ranging from 10 to 14 days.

You should provide an elevation certificate to your insurer to see if it can help lower your premium. This document includes your home's lowest floor elevation, which the insurer will use to determine your flood risk. Under Risk Rating 2.0, the Federal Emergency Management Agency no longer requires elevation certificates for some property owners to obtain coverage.

You can obtain an elevation certificate from your local floodplain manager or have one completed by a land surveyor or engineer.