Flood insurance covers property damage specifically caused by flooding. A mortgage lender typically requires flood insurance for a property located in a region that has been designated as a flood zone by the Federal Emergency Management Agency (FEMA). Flood insurance policies are obtained through private insurance providers and typically cost $700 per year or higher.
How Flood Insurance Works
Flood insurance is backed by the government through the Federal Emergency Management Agency (FEMA), but they don’t write policies directly. Instead, you obtain a policy through flood insurance providers. Flood insurance coverage limits are the same regardless of the flood insurance provider.
This is because they’re federally regulated. There is an allocated limit for building coverage and a separate coverage limit for contents coverage. However, most flood insurance providers allow you to choose your deductible, which is the only cost relating to flood insurance coverage that you have control over.
Flood insurance is required by federal law in some high-risk flood zone areas. Flood insurance is not a replacement for your homeowners policy; it’s a separate policy that is recommended in addition to a typical homeowners insurance policy. Flood insurance typically covers structure and contents in two separate policies, both of which have maximum limits set by FEMA. Some flood insurance providers do offer additional coverage if you want coverage over the allotted limits.
Flood damage and water damage are often confused, and they’re not the same thing. Flood damage is caused by a large deposit of water that accumulates around a building. The ground can’t support the water and it comes into the home. Flood damage is generally caused by a body of water flooding.
However, water damage can be caused by a leaky pipe or an overflowing toilet and is quite different. Water damage may be covered under a homeowners policy, but flood damage is only covered by a flood insurance policy.
What Does Flood Insurance Cover
Flood insurance typically covers damage to your home and its contents caused by rising water from any body of water, typically a stream, lake, river, bay or ocean. Flood insurance doesn’t cover the replacement cost for your contents. Instead, it covers the actual cash value of an item.
This means that it covers the cost to replace or repair an insured item at the time of the loss minus its physical depreciation cost. Each insurance company has different methods to evaluate the actual cash value of an item, so it’s best to speak with your provider for an exact figure.
Another important thing to take note of regarding flood insurance coverage is that things like loss of income and living expenses are not covered, so if your tenants need to move out while the flood damage is being repaired, you’re not going to be reimbursed. However, landlord insurance typically covers loss of income, so if you own an investment property in a flood zone, you will typically need both types of insurance.
Flood insurance coverage typically only covers a portion of structures on the property beside the main house and attached garage. In fact, your lender may allow you to exclude detached structures when they’re not used as residences (meaning there are no living quarters, a bathroom, or a kitchen). This can be a good thing as it could result in lower premiums. However, it’s best to check with your insurance provider on whether it makes sense to use the exclusion.
Flood insurance coverage is typically made up of two categories:
Building or Structure Coverage
The first type of flood insurance coverage is called building or structure coverage. This type of coverage includes your home, the foundation, plumbing, electrical and HVAC systems, as well as built-in appliances, built-in cabinets, carpet and flooring. It is considered the main type of flood insurance, where contents coverage is considered the secondary type of flood insurance coverage.
Flood insurance contents coverage is for your personal belongings and typically includes furniture, clothing, electronics, curtains, area rugs, non-built-in appliances such as washers and dryers, and valuables. Contents coverage is also referred to as personal property coverage, and it’s not automatically included in your flood insurance coverage. You need to ask your provider to add contents coverage to your building or structure coverage.
Residential & Commercial Flood Insurance Coverage Limits
Flood insurance coverage limits are typically:
- Residential Properties: Maximum building coverage is $250,000 with an additional maximum of $100,000 for contents
- Commercial Properties: Maximum building coverage is $500,000 with an additional maximum of $500,000 for contents
Flood insurance coverage limits are the same regardless of the flood insurance provider. Again, this is because they’re federally regulated. There is an allocated limit for building coverage and a separate coverage limit for contents coverage. However, most flood insurance providers allow you to choose your deductible, which is the only cost relating to flood insurance coverage that you have control over.
“Unlike a traditional homeowners policy, flood policies have specific maximum coverage limits regardless of what your home is worth because if your home floods, it will most likely not be a total loss. The cost to remediate the portion of your house that flooded will be significantly less than what it would cost to replace your house entirely.”
– Brad Goldsberry, Agency Producer, Nate Bingel Agency with Farmers Insurance
National Flood Insurance Program
The National Flood Insurance Program is a national government program backed by FEMA, and it regulates flood insurance costs. It guarantees the flood insurance policies but doesn’t directly sell them. Instead, flood insurance policies are offered by licensed flood insurance providers.
FEMA’s objective is to reduce the impact of flooding and make flood insurance affordable. It also encourages communities to adopt floodplain management regulations, which reduce the potential damage caused by flooding.
Further, the National Flood Insurance Program helps promote the purchase and retention of flood insurance coverage. Plus, you can get flood and disaster information. This includes tips like if you need flood insurance, how to reduce your flood insurance costs, and what to do during a natural disaster.
Who Needs Flood Insurance
You need flood insurance coverage if your primary residence or investment property is in a high-risk flood area, which includes low-lying coastal areas and areas near bodies of water. Flood insurance is also right for you if you have a mortgaged property, because most lenders require it due to federal mandates.
FEMA also offers a flood zone map so you can see if flood insurance coverage is right for you based on your property location.
Flood insurance coverage is typically right for:
- Real estate investors who own investment property in a flood zone
- Vacation rental property owners whose property is in a flood zone
- Homeowners who own property in a flood zone
- Any property in a flood zone that has a mortgage, because the lender typically requires a flood insurance policy before approving a mortgage on the property
- Those buying property in a flood zone or a low-lying coastal area that is near a body of water
“Flood insurance is right for homeowners who may not even realize they need it. Many homeowners do not properly measure the risks of flooding or the damage it can create. Homeowners don’t have to live next to a body of water to experience flooding. Torrential downpours combined with uncleared storm drains can lead to a flooded cellar.”
– Todd Kozikowski, Co-Founder & CRO Clearsurance
Where to Find Flood Insurance Quotes
Flood insurance is not offered by every insurance company and it’s not actually offered by FEMA. Instead, you obtain flood insurance from a licensed insurance agent that acts as a flood insurance provider. Keep in mind that flood insurance costs are regulated by the government, so you don’t need to compare the flood insurance providers’ costs.
Instead, you can find out if your current home and auto insurance provider offers flood insurance and if not, choose a flood insurance provider that offers coverage in your area. You can find a list of flood insurance providers through FEMA, online searches, recommendations from your current insurer, or referrals from real estate agents and mortgage lenders in your area.
Four flood insurance providers include:
The Hartford offers flood insurance through its AARP Flood Insurance Plan. In addition to flood insurance, the Hartford also offers homeowners insurance, auto insurance, and business insurance.
To find out more about what states the Hartford offers coverage in and the types of coverage they offer, contact them directly through their website. They have trained flood insurance specialists who can help with your claim. Their website also offers helpful tips on how to protect your home from flooding and heavy rain.
Farmers Insurance offers flood insurance coverage nationwide in communities that participate in the National Flood Insurance Program. Farmers Insurance, like most flood insurance providers, offers both building coverage and contents coverage. They also offer other flood insurance-related coverages, which include debris removal and loss avoidance measures. Contact an agent in your area to find out if your property is in a flood zone and to discuss coverage options.
Progressive Insurance offers flood insurance in addition to its other coverages, including homeowners, automobile, motorcycle, boat, and trailer insurance. You can visit their site and type in your zip code to see if they offer coverage in your area.
Once on the Progressive Insurance site, you can quickly apply for coverage online by filling out a quick quiz on the location of your property, type of property, structures included, etc. In order to find out if Progressive offers additional flood insurance coverage above the maximum federal limits, you need to contact them directly.
Just like the other flood insurance providers we mentioned, Geico offers flood insurance in addition to its regular insurance policies for auto, home, business, etc. It doesn’t provide nationwide coverage, so you need to fill out their online contact form to see if they offer flood insurance coverage in your area.
You can apply online if you’re new to Geico or add flood insurance to your existing policy if you’re already a policyholder. Geico also offers a personal property calculator on their site so you can add up the cost of your belongings.
Flood Insurance Costs
Flood insurance is different from other types of insurance, such as homeowners or landlord insurance, because the costs are regulated by the federal government. This means that the same policy in the same area is going to be the same price regardless of which flood insurance provider you choose to purchase a policy with. It also means that you don’t have to spend time price shopping for flood insurance coverage.
Keep in mind that flood insurance costs can vary widely by area, and properties in high-risk flood areas are generally the most expensive to insure. The average flood insurance costs are $700 per year for a premium, but these costs may go ten or more times higher for properties in high-risk flood zone areas.
Let’s take a look at some average annual flood insurance costs in a few different states:
- California Average Flood Insurance Costs: $786
- Florida Average Flood Insurance Costs: $544
- New York Average Flood Insurance Costs: $1,135
- Texas Average Flood Insurance Costs: $599
Factors That Affect Flood Insurance Costs
As we mentioned earlier, flood insurance costs are regulated, so the costs for the same type of properties in one area are the same or very similar. However, there are a few factors that can affect your flood insurance costs, including where the mechanicals of your house are stored.
“There are a number of risk factors to take into consideration when calculating the premium for a flood risk insurance policy. Some of these are: how far your property is from a river or other body of water, whether your property is situated inside a flood plain, and whether your property has suffered damage from flooding in the past.”
– Alexander Kizir, Director, Quote Chief
Some of the factors that affect flood insurance costs include:
- Property Location: Specifically if the property is in a high, moderate or low floodplain risk area; typically a property in a high-risk area will have a higher flood insurance cost
- The Amount of Your Deductible: Varies by flood insurance provider and typically, the higher your deductible, the lower your flood insurance premium costs
- Property Elevation: This is how high your property sits above the waterline, and typically the higher the property elevation, the lower the flood insurance cost
- Amount of Coverage: You can purchase up to the maximum coverage limits and if you need more, you can purchase additional coverage (not covered by The National Flood Insurance Program); typically the more insurance you purchase, the higher the cost.
- Type of Property: Such as commercial properties, multifamily properties, and single family properties; typically, single family property flood insurance is less expensive than multifamily flood insurance
How to File a Flood Insurance Claim
Filing a flood insurance claim is similar to filing an auto or homeowners insurance claim. You should contact your flood insurance provider as soon as possible and go through their claim process, which usually includes filing the claim online or over the phone and providing proof of loss. An inspector will then come out and verify the damage.
You can typically file a flood insurance claim in three steps:
1. Notify Your Flood Insurance Provider
The first step in filing a flood insurance claim is notifying your flood insurance provider. You want to do this as soon as possible after the flooding occurs. You will need to know the name of your insurance provider, your policy number and the date the damage happened. Usually, you will be assigned to an adjuster who will get back to you within a few days.
2. Document the Flood Damage
After you notify your flood insurance provider that you want to start a claim, you need to document any flood-related damage. You should make a list of all damaged items, separate them from non-damaged items, if possible, and photograph all damaged items as well as any damage to the structure.
3. Complete a Proof of Loss Form
Now that you’ve documented all of your damaged items, you will need to fill out a proof of loss form that your insurance adjuster will provide and help you prepare. It’s a sworn statement that the items and property you’re claiming to be damaged were actually damaged from flooding. The adjuster may also ask for supporting evidence at this time, such as before and after photos, receipts, etc.
After you complete and turn in the form, the insurance adjuster will typically approve or deny your claim and then issue you a check for the damage. The time frame depends on the amount of damage, how many other claimants are filing, and how fast the provider’s claim process goes.
“File as soon as possible. Homeowners have up to a year to file a claim after a flooding incident, but the sooner you communicate with your insurance company, the faster you’ll get the paperwork you need and the faster you’ll get your insurance check to cover the cost of damages.”
– Sean Harper, Founder & CEO, Kin
Related Types of Insurance
If you’re a real estate investor or homeowner who owns property in what FEMA considers a flood zone, then you will typically need flood insurance. In addition to needing flood insurance, you may also need additional types of insurance. For example, flood insurance doesn’t cover loss of rental income, but rental property insurance does.
Some related types of insurance include:
- Rental Property Insurance: This insurance is specifically for an income-producing property that isn’t owner-occupied. Your policy should include liability coverage, as well as loss of income coverage, and coverage to protect your property from weather damage and crime.
- Vacation Rental Home Insurance: Vacation rental insurance covers the risks associated with potential damage to the short-term vacation property you rent out. Your policy should include coverage for the structure and contents of your vacation rental property as well as potential liability and loss of income.
- Vacant Property Insurance: If your vacant or unoccupied property lies in a flood zone, you may need flood insurance as well as vacant property insurance, which covers risk of vandalism and weather damage. The policy should contain liability, peril and vandalism coverage.
- SBA Disaster Loan: Although this isn’t actually a type of insurance, the Small Business Administration (SBA) offers loans to homeowners and renters in areas that have been deemed disaster zones. Help is available in the form of low interest, long-term loans that cover losses not covered by other types of insurance.
Flood Insurance Frequently Asked Questions (FAQs)
Below, we are going to answer some of the most frequently asked questions about flood insurance.
Some of the most frequently asked questions about flood insurance are:
Is Flood Insurance Required if I Don’t Have a Mortgage?
Flood insurance is required by federal law in some high-risk flood zones. It’s also typically required by mortgage lenders if you have a mortgage on a property located in a flood zone. It’s not required in low or moderate flood risk zones, but it is recommended if you live in any flood-prone area.
What Does FEMA Flood Insurance Pay for?
FEMA flood insurance is also known as the National Flood Insurance Program. This FEMA program typically pays for damage directly caused by a flood through two types of policies. One flood policy covers your home or building up to $250,000. The other policy covers the contents (personal property) of your home or building up to $100,000.
Is Flood Damage Covered Under Homeowners Insurance?
While floods are the country’s most common natural disaster, the resulting damage is rarely covered by homeowners or rental property insurance. Rather, homeowners insurance policies typically cover damage from perils such as fire or heavy snowstorms. Keep in mind that insurance companies consider floods to be different from rain coming in through the roof or your windows.
How Much Does It Cost to Fix Your Home After a Flood if You Don’t Have Flood Insurance Coverage?
The cost to fix your home to its pre-flood condition varies depending on a number of factors. This includes the extent of damage caused by the flood, size of your home, and your property’s location. The average cost to repair a home affected by a flood starts at $27,000 for only one inch of floodwater.
Which States Have the Most Floods?
Flooding can happen almost anywhere, even if you’re not directly next to a body of water. However, flooding happens more often in states like Florida and Texas. In states where flooding is common, it’s likely you’ll be required to get flood insurance. Even if not required, it may be a good idea to protect your assets.
“The top ten states that are the most likely to have flood damage include: Texas, Louisiana, Florida, New Jersey, North Carolina, South Carolina, Missouri, New York, California, and Pennsylvania. Home damage caused by a flood can range from the low thousands of dollars all the way up to the total value of the home. Coverage for floods is NOT covered under a standard homeowners insurance policy and needs to be covered under a separate flood insurance policy.”
– Joel Ohman, Certified Financial Planner & Founder, InsuranceProviders.com
Flood insurance is a specialty type of insurance typically recommended for all properties in flood zones, and it’s typically required by mortgage lenders when the mortgaged property lies in a flood zone. Flood insurance coverage is backed by FEMA and sold by flood insurance providers, and the cost is regulated by the federal government.