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Imagine buying your dream home, and then it sustains serious flood damage. You may think the damage is covered because you have homeowners insurance. However, a standard homeowners insurance policy doesn’t cover most types of flood damage caused by hurricanes and other natural disasters.
You typically need a separate type of property insurance called flood insurance for financial protection in case your home or personal belongings are directly damaged by a flood.
It’s possible to buy private flood insurance, but the vast majority of flood policies in the U.S. are provided through the National Flood Insurance Program (NFIP). The program is managed by the Federal Emergency Management Agency (FEMA), but policies are sold and serviced by more than 50 insurance providers, as well as a program called NFIP Direct.
When you have a mortgage on a property with a high risk of flooding, your lender probably mandates flood insurance. If you’re not required to purchase coverage, though, you may be tempted to forgo it, particularly as premiums soar in many coastal communities.
But doing so comes with a huge financial risk: FEMA estimates that a single inch of floodwater can cost more than $25,000.
If you’re considering flood insurance but balking at the price, read on. We’ll break down the average cost of flood insurance, the factors that determine pricing, and what you can (and can’t) do to save money on coverage.
Policies issued by the National Flood Insurance Program have the following coverage limits for building coverage (insures your physical home) and contents coverage (insures your personal property, like furniture, electronics, and clothing).
Residential properties:
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Up to $250,000 for building coverage
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Up to $100,000 for building contents
Commercial properties:
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Up to $500,000 for building coverage
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Up to $500,000 for building contents
Note that building coverage and contents coverage must be purchased separately, whether you’re insuring a residential or commercial property. For flood insurance claims, separate deductibles will apply to each type of coverage.
You may be able to score higher coverage limits and cheaper premiums by going with a private flood insurance policy. However, availability is often limited, especially in high-risk flood zones. There’s also no guarantee that private insurance companies will renew your policy if they decide it’s too risky.
Under FEMA’s new Risk Rating 2.0 framework (we’ll explain what that means in a moment), dropping an NFIP policy and later re-enrolling could result in steep premium hikes. That’s because Congress generally limits premium increases to 18% annually for primary residences and 25% for secondary homes and commercial properties. But if you cancel your policy and then return, your premiums will be based on the full risk of insuring your property.
Flood damage isn’t covered by a standard renters insurance policy. Renters can buy a flood policy through the NFIP to insure their personal property against flood damage. Rates for a renters flood policy start at about $100 a year, according to FEMA.
Many factors affect flood insurance pricing. But if you’re buying flood insurance coverage through the NFIP, your cost will be the same no matter what company or insurance agent you go through.
As with other types of insurance, your premiums are generally higher if you’re riskier to insure. FEMA used to rely mostly on flood zones and a property’s elevation to assess risk. But in 2023, the agency completed the rollout of a new methodology called Risk Rating 2.0 that uses an individual property’s risk of flooding to determine pricing.
Now, FEMA’s calculations consider a broader range of factors to create a unique risk profile of the insured home or building, such as:
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Location and proximity to potential flood sources
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Vulnerability to multiple types of flooding, like river overflow, storm surge, and heavy rainfall
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The structure’s history of flooding
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Design and age of the home structure
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Cost of rebuilding
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Elevation of the structure and whether utilities are elevated
Premiums will also depend on your coverage limits, policy deductibles, and whether you’re insuring a primary or secondary home.
To figure out your property’s risk of flooding, FEMA’s flood maps are a good place to start. Warning: These can be confusing for the average person to read.
Enter your address on FEMA’s Flood Map Service Center using a computer instead of a phone or tablet, then click “search.” Choose the dynamic map option. It will then generate a PDF map for your property. Be patient, though, because this can take a minute or longer.
Once the map is generated, look at the red pin, which represents your property’s location. There, you’ll see how your property is classified:
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Special Flood Hazard Areas: These are considered high-risk flood areas and are usually categorized as Zone A or V. Properties in these areas have at least a 1 in 4 chance of flooding during a 30-year mortgage. You’ll be required to buy flood insurance if you have a federally backed mortgage, like an FHA loan or VA loan, on a home in a Special Flood Hazard Area.
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Non-Special Flood Hazard Areas: These areas are at low to moderate risk of flooding and are labeled Zone B, C, or X (sometimes represented with a shaded X). You aren’t required to purchase flood insurance in these areas, but it’s recommended for protection against catastrophic financial losses.
No matter where you live, your property has some flood risk. In the past 20 years, 99% of counties in the US have experienced flooding. About 40% of NFIP flood insurance claims are from areas outside of high-flood-risk zones.
Flood insurance isn’t mandated by law if you don’t have a mortgage. But if you have a federally backed mortgage and you live in a Special Flood Hazard Area, it’s generally required. Mortgage lenders can also require flood insurance at their discretion, regardless of whether you’re in a flood zone.
You’re responsible for the cost of repairs, rebuilding, and replacing your property if you don’t have flood insurance and your home floods. You may qualify for a FEMA grant to help with the costs. However, the average FEMA individual disaster grant was just $3,000 between 2016 and 2022 — compared to the average NFIP payout of around $66,000 for flood claims in the same period.
Note that if you’ve received certain types of federal disaster assistance in the past — like a FEMA grant or a low-interest loan from the U.S. Small Business Administration — you’re required to have flood coverage to qualify for federal disaster aid in the future.
As flood insurance rates rise in many parts of the country, affordability is a major concern. Fortunately, there are a few ways to make yourself less risky to flood insurance companies and potentially lower your costs.
You may be able to lower your insurance rates by mitigating your home’s flood risk. Options include:
An elevation certificate is a document that verifies the elevation of your home or building. Though it’s no longer required to purchase NFIP policies, you can submit one to your insurance agent to see if it can qualify you for a discount.
One way to lower your premiums for virtually any type of insurance is to choose a higher deductible, which is the amount you’ll pay before coverage kicks in. Just be sure to choose a deductible you can afford to pay out of pocket.
You may get a flood insurance discount if your community is enrolled in the NFIP’s Community Rating System, which provides insurance discounts in communities that establish floodplain management standards that go beyond the NFIP minimums. Your community may also qualify for FEMA Hazard Mitigation Grants to help pay for projects that reduce flooding risks.
How much does flood insurance cost in the U.S.?
The median cost of flood insurance in the U.S. is $786 for NFIP policies, but costs vary widely. Factors that affect premiums include location, elevation, age of the property and building materials, past claims history, and the coverage levels and deductibles you choose.
Why is flood insurance so expensive?
You generally pay higher flood insurance premiums if your home is at high risk of flooding. Severe natural disasters and FEMA’s Ratings Risk 2.0 have also pushed premiums higher for many policyholders.
Is flood insurance necessary?
Flood insurance may be required by your lender if you have a mortgage on your property. Even if it’s not mandated, it’s recommended that you carry coverage because, without it, you’re responsible for the full costs of replacing or repairing your property that sustains water damage from a flood.