Flood Insurance Requirements

According to FEMA, three inches of floodwater in a 1,000-square-foot, single-story home results in about $12,000 in damages.

The Flood Disaster Protection Act of 1968 created the National Flood Insurance Program ( NFIP ). With NFIP insurance, millions of homeowners are able to reliably and affordably get flood insurance protection for their homes. Though accessible, home insurance rules and requirements can be a bit confusing.

Below, we answer common (and not-so-common) flood insurance questions so you can get the coverage you need. By the end, you’ll understand:

• Whether you need flood insurance

• What your flood zone means

• What’s legally required vs. what’s a good idea

• How to save on flood insurance

Don’t forget that Insurify can help you save on your home insurance. Fill out one confidential form, and get matched with top insurers in your areas. Compare your options side by side, and buy when the price is right. Try it today!

What Is Flood Insurance?

Flood insurance is a type of hazard insurance . It’s designed to cover losses to your home and contents that result from water damage due to flooding caused by:

• Heavy or prolonged rains

• Coastal storm surges

• Snowmelt

• Blocked storm drainage systems

• Levee or dam failure

It also covers different types of flooding, including overflow, runoff, mudflow, and erosion. It covers traditional homes and mobile homes.

There is a big difference between flood insurance and coverage for water damage. Most standard home insurance policies offer some coverage for water damage that is not the result of weather-related events or other external factors, such as a burst pipe.

To cover flood damage, property owners need to purchase a separate policy either through their home insurance provider, another private insurer, or the National Flood Insurance Program ( NFIP ) directly. Most standard flood insurance policies are backed by the federal government.

What Is Covered Under a Flood Insurance Policy?

Flood insurance covers damage to structures and personal property caused by flooding. The coverage is separated into two categories: building and contents coverage. Under building coverage, flood insurance covers:

• Foundation walls

• Staircases

• Anchorage systems

• Electrical systems

• Plumbing systems

• Furnaces

• Water heaters

• Appliances such as refrigerators, dishwashers, and stoves

• Cabinetry and built-in bookshelves

• Window blinds

• Detached garages

• Fuel tanks

• Well-water tanks and pumps

• Solar energy systems

• Debris removal

• Damage cleanup

Flood insurance can also cover home contents, including:

• Curtains

• Washer and dryer

• Microwave oven

• Carpets

• Personal belongings, including clothing, electronics, and furnishings

• Valuable items, such as jewelry, furs, and artwork

Typically, you need to opt in to purchase home contents coverage unless you have a Preferred Risk Policy (PRP). You should also note that non-appliance belongings kept in basements or crawl spaces may not be covered.

Be sure to insure your home and contents for replacement cost value (RCV). That means you’re covered for whatever the replacement of the item or structure costs you, up to your policy limit. This is different from the actual cash value (ACV), which only insures you for the value of your property minus depreciation.

Flood Insurance Exclusions

Flood insurance does not cover additional living expenses —expenses you incur when you need to live outside your home. It also doesn’t cover you for damage that could have been avoided by the homeowner.

Your belongings that tend to live outside the home are also excluded, including:

• Cars and other vehicles

• Landscaping (trees, shrubs, etc.)

• Septic systems

• Decks and patios

• Hot tubs and swimming pools

• Fencing

• Sea walls

Flood insurance does not cover water damage that does not occur from flooding. For example, damage from a sewer backup pump that fails due to a mechanical issue would not be covered with flood insurance.

Is Flood Insurance Required?

Flood insurance may be required for borrowers —people who currently have a mortgage (or other lending product) backed by their dwelling. People without mortgages can choose whether they want to carry flood insurance.

Flood Insurance for Borrowers

If you live in a high-risk flood zone, you are federally required to carry flood insurance. A high-risk area is deemed to have at least a one percent chance of flooding annually. This is also called a 100-year flood zone. These zones are marked with the letters A or V in the title.

If you live in lower-risk areas —Zone B, Zone C, or Zone X—you won’t be federally required to carry flood insurance. However, your lender may still require you to carry it as a condition of your loan.

If your home is not mortgaged, you are not required to carry flood insurance or any home insurance. However, if you live in an area with a risk of flooding, it’s always a great idea to carry flood insurance.

That’s because even minor flooding can cost tens of thousands of dollars to repair. Floods are extremely destructive, as they can rot wood, create mold, damage floors and electrical work, and more. The average homeowner can easily run out of savings trying to repair flood damage.

Finally, flooding in much of the U.S. is becoming more common, according to the U.N. Environment Programme. In 2020, the EPA found that flooding in coastal areas was more common at every site the EPA was monitoring. And that flooding has intensified over recent years.

Flood Insurance and Escrow

If you have a mortgage and a flood insurance policy, you can likely pay that amount through your mortgage servicer using an escrow account. This can be very useful, as your lender will ensure you are in compliance with flood insurance requirements.

How Much Flood Insurance Is Required?

The amount of coverage you need depends on:

• The cost to rebuild your home

• The cost to replace your home contents (personal belongings)

• The outstanding balance on your home loan

No minimum amount of insurance exists through the NFIP. Your lender will likely require you to carry enough insurance to cover structures—your dwelling, garage, and any applicable outbuilding(s).

The maximum amount of flood insurance you can purchase with an NFIP policy is $250,000 for building coverage and $100,000 for home contents coverage. For many homeowners, these limits will fall short in the event of a total catastrophe.

If that’s the case for you, you may be required to purchase additional flood insurance from the private market. Even if your lender doesn’t require it, you should still purchase additional insurance if NFIP insurance leaves coverage gaps. Remember: your home is also a real estate investment. Be sure to protect your investment.

Can My Lender Require More Flood Insurance Than the Minimum?

Yes, your lender can stipulate that you carry more coverage than the minimum. Don’t be too discouraged by this. Your lender is protecting the asset that acts as collateral for your loan. If your lender thinks that the minimum isn’t enough to cover your home, trust that judgment.

Common reasons minimum flood insurance won’t provide enough coverage include:

• Luxury home building materials and fixtures

• Rebuilding costs for your home are higher than the minimum

• You own high-value personal property

Flood Insurance Coverage Limits

The NFIP limits for policy amounts are:

• $250,000 for building coverage and $100,000 for contents coverage for residential properties

• $500,000 for building coverage and $500,000 for contents coverage for commercial properties

Policyholders should also know that there is a 30-day waiting period from the date of purchase to when your flood insurance policy goes into effect. You can qualify for a shorter waiting period when:

• You first get your mortgage, extend it, or renew it.

• You change your existing flood insurance coverage during your policy renewal.

• Your property is newly designated to be in a high-risk flood zone.

And you should account for exclusions to your property. If you want to get coverage for something typically excluded from NFIP coverage, you should consult a private insurance company for a special policy.

NFIP Flood Insurance Deductibles

The minimum deductible for NFIP -based flood insurance in pre-FIRM subsidized zones is:

• $1,000 for coverage of $100,000 or less

• $2,000 for coverage of more than $100,000

The minimum deductible for NFIP -based flood insurance in “full-risk” zones is:

• $1,000 for coverage of $100,000 or less

• $1,250 for coverage of more than $100,000

Flood Insurance by Flood Zone

Flood zones, also called Special Flood Hazard Areas ( SFHAs ), are common across the U.S., in all climates. Even deserts have flood zones. Flood zone designations are based on the base flood elevation (BFE) of an area. The BFE denotes the likely elevation of surface water in the event of a flood—for example, one to three feet.

Flood insurance is mandatory for homes with mortgages located in flood zones with an “A” or “V” in the title. If your home is in another flood zone, your mortgage provider may or may not require that you carry flood insurance. The good news is that flood insurance premiums are less expensive for homes in lower-risk areas.

Below is a table outlining the many possible flood zones plus the risk and type of flooding associated with that designation. Some designations are older and, while no longer in use by the NFIP or FEMA, may show up in documentation for your home. Some homes are also given a combination of flood zone designations. If this is the case for your property, a slash will be used in the title (e.g., Zone AR/AE).

If you are unsure about your home’s flood zone designation, you can fill out a Standard Flood Hazard Determination Form (SFHDF) to identify your area’s designation.

What If Your Property Has Been Given Different Flood Zone Determinations?

In some cases, the flood zone rating given to your property will be inconsistent. In other words, your bank, FEMA, or another party may list your property as being in different flood zones. In this case, your insurance company will use the more hazardous flood zone per instructions from FEMA.

That is unless your property qualifies for the “ grandfather rule.” The grandfather rule only applies to properties in Emergency Program communities and pre-FIRM buildings in the Regular Program. Under the grandfather rule, properties qualify for subsidized flood insurance rates.

What Is a Pre-FIRM Building?

A pre-FIRM building is one that had construction or improvements made to it before the effective date of an initial Flood Insurance Rate Map (FIRM). In other words, on or before December 31, 1974.

Because these buildings were not built with flood protection in mind, they can be insured at a subsidized rate. This qualification helps people afford flood insurance when it would be prohibitively expensive.

Do I Need Flood Insurance?

If you live in a high-risk flood area, flood insurance is mandatory. But what if you don’t?

Your lender can still require flood insurance for lower-risk areas. But even if it doesn’t, you should still weigh the pros and cons of purchasing a policy.

Considering the rise in the frequency and severity of floods in many areas of the country, people in shaded Zones B and X should heavily consider purchasing. Flood insurance in these areas is less expensive and can save you a ton of money in the event of catastrophe.

But what if you live in unshaded Zone C or X, where the risk is less than 0.2 percent annually? Flood insurance will likely be left to you to decide. Doing some additional research is key, as flooding patterns have changed dramatically over the past 20 years, and flood zone maps have not always kept up with these changes.

To better understand your risk, look up your address using Flood Factor (www.floodfactor.com). Flood Factor uses advanced modeling techniques to better understand the flood risk in a changing climate. It scores areas out of 10. The lower the number, the lower the risk.

Flood Insurance Requirements for Condos

If you live in a condo, flood insurance can be provided in two ways. First, your homeowners association can purchase building and contents coverage using a Residential Condominium Building Association Policy (RCBAP).

If the association purchases coverage in the name of the condo owner, then in-unit coverage is provided. If the association does not do this, you will need to purchase separate flood insurance.

Ask your insurance agent about coverage for property stored outside the unit, such as contents kept in a storage locker.

Flood Insurance Requirements for Government-Backed Loans

If you live in a high-risk area and have an FHA Loan, you will need to carry flood insurance. This is true for any federally backed loan, including a VA loan.

You should also be aware that government-backed loans will require you to list the lender as the “Loss Payee” on your insurance policy. Most lenders will require this, whether or not your loan is backed by a government program, so there’s no need to panic.

Finally, you’ll need to ensure that your policy will cover the amount left in your mortgage (mortgage payoff) should your house be destroyed and it be determined that your house should not be rebuilt.

Frequently Asked Questions

Flood Insurance Is Appropriate for Most Homeowners —But You Can Still Save

Saving on flood insurance is no small task. But you do have options. Here are some common and uncommon techniques to help lower your costs:

• Take advantage of discount programs that lower your overall homeowners insurance costs. This can include bundling and paying in full.

• Elevate basement appliances, and store basement items on shelving.

• Invest in flood preparedness measures, such as flood gates, sewage water backstop, swales (depressions that direct stormwater away from your home), and flood-mitigating landscaping.

• Ensure that your community participates in the NFIP Community Rating System —a program that incentivizes communities to use flood mitigation techniques.

• Advocate for large-scale flood mitigation with your local and state governments. The installation of levees and dams can lower costs for homeowners within the region.

You can also visit the government website FloodSmart.gov to learn more about mitigating flood damage in your area.

Finally, don’t forget to review your home insurance rates at least every six months. The insurance market is constantly changing, and chances are the cheapest policy last year isn’t the cheapest policy this year. Insurify makes it easy to review your options and buy when the price is right. Try it today!