Flood insurance (NFIP): who needs it and what it covers

Everyone lives in an area with some flood risk, not just people by the ocean or a river.⁴ This guide is for homeowners and renters who want to know whether their insurance covers them, for buyers looking at a home in a flood zone and for anyone who has already flooded: it explains why homeowners insurance does not cover floods, when NFIP coverage is required, what it covers and what it does not, the wait before it starts, how it is paid and how to file a claim.

Wait before a new policy starts, with some exceptions

30 days²

The most an NFIP building policy covers for a home

$250,000²

The most a contents policy (your belongings) covers, including for renters

$100,000²

To buy coverage after your lender's notice, before it buys a policy for you

45 days¹¹

Why your homeowners insurance does not cover you

According to the CFPB, standard homeowners insurancehomeowners insuranceHomeowners insurance pays for losses and damage to your property if something unexpected happens, like a fire or a burglary, and usually includes liability coverage if someone is hurt at your home. Lenders require it as long as you have a mortgage, because the home is their collateral, and almost always collect it inside your monthly payment through the escrow account. The price depends on the location, the rebuilding cost, the deductible and your history. A standard policy does not cover floods or, in many states, earthquakes: those risks are insured separately.See the full definitionClose does not cover damage from earthquakes or floods, although it may be possible to add that coverage.¹ FloodSmart, the website of FEMA’s National Flood Insurance Program (NFIP), says the same about most homeowners and renters policies.² That is why flood insuranceflood insuranceFlood insurance is a separate policy that can cover a building, its contents, or both, when flood water causes damage. Most homeowners insurance policies do not cover that damage. Most of these policies are backed by FEMA's National Flood Insurance Program (NFIP) and bought through insurers and agents. If your home is in a high-risk flood area and your mortgage is backed by the federal government, the lender is required to demand it; outside those areas it is optional, but floods happen there too.See the full definitionClose exists: a separate policy with its own premium and its own deductible.

The NFIP sells policies to homeowners, renters and businesses. Any homeowner who lives in a community that participates in the program can buy one, including condo and townhouse owners.² A community participates if it follows the NFIP’s floodplain management rules, and most communities in the country do.³

Counting on government aid is not a plan either. FloodSmart explains that federal disaster assistance only comes if the president declares a disaster, that most floods do not get that declaration, and that the aid usually comes as loans repaid with interest; flood insurance claim payments, on the other hand, do not have to be paid back.³

Is it required? Flood zones and loans

FEMA’s flood maps divide the country into zones. Zones starting with A (A, AE, AH, AO, AR and A99) and V (V and VE) are high risk. If your home is in one of them and you have a federally backed mortgage, you must buy flood insurance as a condition of the loan; if you do not have that kind of mortgage, FloodSmart still strongly recommends it.⁴

What FloodSmart says by zone

Zones A and V

High risk

• With a federally backed mortgage, coverage is a condition of the loan.⁴
• Without that kind of mortgage, it is strongly recommended.⁴
• You may need an elevation certificate.⁶

Zones B, C and X

Moderate or low risk

• The law does not require it, but it is recommended.⁴
• One in three claims comes from these zones.⁴
• Some banks require it even outside high-risk areas.³

Zone D

Undetermined risk

• No risk study has been done; that does not mean there is no risk.⁴
• Coverage is recommended.⁴
• Check every year whether your zone changed.⁴

Find your zone at the FEMA Flood Map Service Center or through your community's floodplain administrator.⁴

The rule comes from federal law. Regulated lenders may not make, increase, extend or renew a loan on a home in a special flood hazard area (SFHA) where coverage is available unless the home is insured against floods for the life of the loan, for at least the loan balance or the maximum coverage available, whichever is less. They must accept private insurance that meets those requirements, and coverage is not required for a detached structure that does not serve as a residence.¹¹

There are two other cases where coverage is required. Some banks require it even if you do not live in a high-risk area. And if your home received federal disaster assistance in the past, you must have flood insurance to get it again; the requirement goes with the home, so it also applies if you bought it from someone who received that aid.³

If you disagree with your zone, there are two routes. You can request a map change with a Letter of Map Amendment (LOMA) or Letter of Map Revision (LOMR).⁴ And you and your lender can jointly ask FEMA, with technical information, to review whether the home is in a flood hazard area; FEMA must answer by letter within 45 days, and its decision is final.¹¹

What it covers and what it does not

For a home, the NFIP has two coverages: building, up to $250,000, and contents, up to $100,000 for your belongings inside the home. They are usually bought separately and each has its own deductibledeductibleA deductible is the part of an insurance claim you pay yourself. When you have a covered loss, the insurance company subtracts the deductible from the claim amount and pays you the rest. You may have a different deductible for each type of coverage. You will find it on the first page of your policy, called the declarations page, along with your coverages and limits. In taxes, the word "deductible" means something else: an expense that can lower the taxes you owe.See the full definitionClose. If you rent, contents coverage protects your belongings up to $100,000.²

Covered	Not covered
Electrical and plumbing systems	Cash, precious metals and valuable papers
Refrigerator, stove and built-in appliances	Cars and other vehicles
Installed carpet, cabinets, foundation walls and stairs	Belongings kept in a basement
Clothing, furniture and electronics (contents)	Things outside the building: landscaping, deck, fence, pool
Valuables such as original artwork, up to a cap (contents)	Temporary housing and extra living costs during repairs

The list summarizes what FloodSmart publishes, which also notes that the cause matters: the policy covers water from a sewer that backed up during a heavy rainstorm, but not from a sewer backup caused by clogged pipes.² NFIP policies also do not cover mold damage.⁷

If a flood badly damages your home and it is in a special flood hazard area, Increased Cost of Compliance (ICC) coverage may help. It provides up to $30,000 to elevate, move or rebuild the home when your community determines the damage equals 50% or more of its pre-flood market value, or that it was damaged repeatedly. It is claimed separately, and combined with the building claim it cannot exceed that coverage limit.⁹

The 30-day wait: when to buy

A new policy does not protect you right away. FloodSmart says coverage starts 30 days after you buy, with four exceptions.² The law counts those 30 days from when you complete the application and pay the initial premium.¹²

When your policy starts and when it renews

1. 1. When you close or renew your mortgage

   No wait

   If you buy coverage when making, increasing, extending or renewing a mortgage, it starts without the 30-day wait.¹²

2. 2. If you buy on your own

   30 days later

   The 30 days count from when you complete the application and pay the initial premium.¹²

3. 3. If your zone was just remapped to high risk

   One day, if you buy within 12 months

   And if you buy or renew within those 12 months, the Newly Mapped discount may apply.⁴²

4. 4. Renew every year

   Before it expires

   The policy lasts one year and does not renew on its own; you get reminders before it expires.⁵²

5. 5. If you missed the date

   Up to 30 days after

   Coverage stays good for 30 days if you renew and pay in full within that time; if you let it lapse, a new policy takes 30 days.⁵²

The practical lesson: do not wait for a storm forecast. If you buy when the water is already coming, the 30-day wait means your new policy will not cover that flood.² Continuous coverage has another advantage: FloodSmart says it lets you lock in a lower rate even if your map or zone changes, and that letting your policy lapse can cost you certain discounts.⁵

What it costs and how it is paid

We do not publish premium prices: every policy is different. FloodSmart explains that your rate depends on three things: where your home is, how it is built and what it would cost to replace. The more than 48 companies that sell NFIP policies use the same method, so all of them offer the same rate.² A quote from an agent gives you your number; FloodSmart lists the NFIP’s number, 877-336-2627, if you need help.⁴

Example with real numbers

Example: you buy a home in zone AE with a federally backed mortgage

A general case, with no prices; your lender and your agent give you the numbers for your home.

Are you told before you sign?

Yes, in writing and a reasonable time ahead¹³

Is coverage required?

Yes, for the life of the loan¹¹

Minimum building coverage

The loan balance or the maximum available, whichever is less¹¹

When does it start?

No wait, if you buy it when the loan closes²

How is it paid?

Usually in your monthly payment, through escrow¹¹

Can it be private insurance?

Yes, if it meets the coverage requirements¹¹

Your belongings go on a separate contents policy with its own deductible.² The calculator shows how your monthly payment changes with insurance.

Run it with your numbersMortgage calculator

If your loan comes from a regulated institution, the law says that, with some exceptions, the flood premium is paid to the lender or servicer along with your loan payments and deposited in your escrowescrow accountAn escrow account is an account set up by your mortgage lender to pay certain property-related expenses on your behalf, mainly property taxes and homeowners insurance. The money comes from a portion of your monthly mortgage payment: each month you contribute a share and the loan servicer pays the bills when they come due. That is why your payment is higher than principal and interest alone, and why it can change when taxes or the insurance premium go up. In some states the word also names the period between the offer and the closing.See the full definitionClose account.¹¹ So if the premium goes up, your monthly payment can go up; the guide on why your escrow payment went up explains how it is recalculated.

There are ways to manage the cost. If your zone is about to move to higher risk, FloodSmart recommends buying or renewing before the change: the premium usually cannot rise more than 18% a year until it reaches the full risk rate. And if you buy a home in a higher-risk zone, you may be able to assume the prior owner’s NFIP policy, whose rate also usually cannot rise more than 18% a year; a new policy starts at the full rate, less discounts.⁴ An elevation certificate, which shows how high the home sits compared with expected floodwaters, does not set your rate but can identify discounts; most homeowners do not need one to buy coverage, except in zones A or V, and your community may already have one on file.⁶

If your lender says you are missing coverage

If your home is in a flood hazard area and the lender or servicer finds you have no flood insurance, or not enough, it must notify you to buy coverage at your expense. If you do not buy it within 45 days of the notice, it must buy it for you and may charge you the premium and fees, even back to the date your coverage lapsed.¹¹

If you are buying a home, the notice must come earlier. When a regulated lender determines the home is in a special flood hazard area, it must notify you in writing a reasonable time before you sign. The notice warns that the home is in that area, explains the insurance requirements and says you can buy coverage through the NFIP or from a private insurer.¹³ The guide on how to buy a home step by step shows where this step fits.

If this is you

You are buying a home

If the home is in a flood zone, the lender's notice must reach you before you sign.¹³ Buying coverage at loan closing avoids the 30-day wait.²

You rent your home

NFIP contents coverage protects your furniture, clothing and electronics up to $100,000. Most renters policies do not cover floods.²

You already flooded

Report the loss to your insurer as soon as possible and document everything before throwing anything away. If there is a disaster declaration, also apply for federal aid.⁷

You prefer to read in Spanish

FloodSmart has pages in Spanish, such as the one on what to know before buying a policy.¹⁰

If you flood: how to file a claim

FloodSmart says to start your claim as soon as possible. Report the flood to your insurer; you will be assigned an adjuster who inspects the home. Before the visit, take photos and videos, write down the make, model and serial number of appliances and keep samples of damaged carpet, flooring and curtains. Ask the adjuster to show their Flood Control Number card and review the estimate they prepare carefully. Payment can take four to eight weeks, and if you have a mortgage, the check is made out to you and your mortgage company.⁷

If your claim is denied or you disagree with the amount, talk to your adjuster or insurer first. If that does not resolve it, you can appeal to FEMA within 60 calendar days of the date on the denial letter, in writing, with a copy of the letter and your evidence. Appealing costs nothing and you do not need anyone to represent you. If you instead complete an appraisal to settle the amount, you can no longer appeal to FEMA. To sue your insurer you have one year from the denial, and appealing does not extend that deadline.⁸

Common mistakes

• Mistake: Believing your homeowners or renters policy covers floods.

  Instead: Most do not; you need a separate flood policy.²

• Mistake: Buying coverage once a storm is forecast.

  Instead: A new policy takes 30 days to start, with some exceptions.²

• Mistake: Thinking nothing happens outside high-risk zones.

  Instead: One in three claims comes from low- and moderate-risk zones.⁴

• Mistake: Letting your policy lapse.

  Instead: It does not renew on its own; renew every year to keep coverage and discounts.⁵

• Mistake: Keeping valuables in the basement.

  Instead: Belongings kept in a basement are not covered.²

• Mistake: Throwing out damaged items before documenting them.

  Instead: Take photos and videos, note make and model, and keep samples.⁷

What to do this week

1. Look up your address at the FEMA Flood Map Service Center or ask your community’s floodplain administrator for your zone.⁴
2. Read your homeowners or renters policy and confirm whether it excludes floods; the home insurance guide helps you read it.¹
3. Ask an insurance agent for a quote, for the building and for your belongings separately.²
4. If you already have a policy, note the expiration date: it does not renew on its own.⁵
5. Take photos and videos of your home and belongings today, with the make, model and serial number of appliances.⁷
6. If the cost of coverage strains your budget, a HUD-approved housing counselorHUD-approved housing counselorA HUD-approved housing counselor works at an agency HUD has approved to provide housing counseling: independent, expert advice customized to your situation about buying a home, renting, a missed mortgage payment, a foreclosure or credit problems. The agencies usually charge little or nothing; many serve in Spanish and offer the homebuyer education course several assistance programs require. They are not lenders or real estate agents and sell you nothing. Your county page lists the official agencies with phone numbers.See the full definitionClose gives independent advice, often free or at low cost.¹⁴