What Is Flood Insurance?

Margaret Wack
Margaret Wack

Flood insurance protects a home or other structure from damage caused by a flood. A flood is defined by FEMA as “the complete or partial inundation of normally dry land that covers at least two properties.” Floods can be caused by an overflow of tidal or inland waters, rapid accumulation or runoff of surface waters, or mudflow, or as a result of erosion.

Since homeowners insurance specifically excludes flood damage, many homeowners may find it necessary to purchase flood insurance separately depending on where they live and the value of their property. 

Operated by FEMA, the National Flood Insurance Program (NFIP) provides affordable flood insurance to property owners, renters, and businesses. FEMA doesn’t sell flood insurance to customers directly, so you’ll have to work with an insurance provider that participates in the program. Some private companies are now offering flood insurance as well.

How Flood Insurance Works

Flood insurance works by protecting your property in the case of damaged caused specifically by a flood. Building property coverage includes things like the foundation, electrical and plumbing systems, and appliances. 

Personal property coverage includes items like personal belongings, clothes, furniture, and more. While you can purchase building property coverage and personal property coverage separately, it’s usually a good idea to have both.

When Do You Need Flood Insurance?

Flood insurance is a good idea if you live in an area that experiences or is at risk of flooding. This typically includes coastal areas as well as areas with a history of storms and flash floods. Even if you live in an area with only moderate risk, flood insurance can still help protect your property in the case of a flood-related disaster. 

FEMA’s flood insurance maps classify different areas of the country into categories of highest risk and moderate-to-low risk.

Highest risk

Areas that are at the highest risk have a one in four chance of flooding during a 30-year period. This includes Special Flood Hazard Areas. Most property owners in high-risk areas are required to purchase flood insurance.

Moderate-to-low risk

Flood insurance isn’t required for property owners in moderate-to-low risk areas, but it’s still recommended. Floods can happen anywhere, and while the risk of experiencing a flood in a moderate-to-low risk area is lower than that of a high-risk area, there’s still a chance that your property could experience a flooding disaster.

Areas with undetermined risk

Some areas have an undetermined risk, usually because they’re unstudied or may contain undetermined hazards. In these areas, flood insurance rates reflect the uncertainty surrounding the risk of a flood, and may be higher than in moderate-to-low risk areas.

Flood Insurance Pros and Cons

Flood insurance comes with a variety of benefits. If your property experiences a flood, insurance coverage can help you recoup any losses you experience. Flood insurance is generally inexpensive, and you can usually bundle it with other insurance coverage. However, if you live in an area where you’re relatively sure there won’t be flooding, flood insurance may not be necessary.

Flood insurance pros

  • Protects your building property and personal property from flood damage
  • Flood insurance can compensate you even without a Presidential Disaster Declaration
  • Flood insurance can provide more funds than other forms of disaster relief

Flood insurance cons

  • You may live somewhere with a low risk of flooding
  • Only covers up to $250,000 for your property and $100,000 for your personal belongings

The Cost of Flood Insurance

The cost of flood insurance depends on a variety of factors, including where you live and the value of your property and personal possessions. According to the Insurance Information Institute (III) in 2018, the national average premium for flood insurance was $642. As a general rule, you’ll likely pay more than the national average if you live in a high-risk area, and may have lower premiums if you live in an area with moderate or low risk.


How much flood insurance do I need?

The recommended minimum flood insurance is based on the replacement cost of your home. You may also want to consider more robust coverage based on the value of your personal belongings and other factors related to your property. In most cases, you should invest in both building property coverage and personal property coverage.

How to get flood insurance?

While your insurance provider may facilitate the purchase, flood insurance is technically purchased through FEMA. FEMA doesn’t sell flood insurance directly to customers, so you’ll have to find an insurance agent or insurer who participates in the National Flood Insurance Program. Alternatively, some private insurance companies also offer flood insurance.

Does homeowners insurance include flood insurance?

Homeowners insurance does not include flood insurance. However, consumers may be able to purchase flood insurance through the same provider from which they purchase home insurance. These insurers act as a liaison between the consumer and FEMA.

About the Authors

Margaret Wack is a writer for Reviews.com. She's covered topics including personal finance, student loans, insurance, and more for publications including The Simple Dollar, PersonalLoans.org, and Interest.com.