Homeowners’ Guide to Flood Insurance

Flood insurance is very important for homeowners recovering from a flood. Here's what you need to know about buying insurance that will protect you and your family.

Heartland Flood Help is not connected in any way with any insurance company. Our only purpose is to help residents prepare for floods and recover from flooding. Flood insurance is very important for flood recovery.

Here is what you need to know about flood insurance for homeowners. You also should learn about flood insurance in general.

We hope this will help you make the best decision for yourself and your family.

On this page:

What Type of Flood Insurance You Need to Buy

As a homeowner, you will buy flood insurance for two separate things — building coverage and contents coverage.

  • Building coverage helps pay for flood damage to the structure of your home, including walls, floors, and electrical and plumbing systems. Things like central air conditioning, furnaces, water heaters, sump pumps, refrigerators, stoves, and cabinets also fall under building coverage.
  • Contents coverage helps pay for flood damage to the things you own inside your home. These contents include things like televisions, computers, washers, dryers, portable dishwashers, clothes, toys, couches, and other furniture.

Ask your insurance agent to tell you everything that is covered. It is important to know what the insurance will help you pay for after a flood.

You likely will be buying flood insurance offered through the National Flood Insurance Program (NFIP). The highest amount of building coverage you can buy with this insurance is $250,000. The maximum for contents coverage is $100,000. (The coverage amount is the highest amount of money the insurance company will pay you for flood damage.)

How Much You Will Have to Pay

You must pay the insurance company each year for your flood insurance policy. This payment is called a premium.

If you live in a high-risk flood area, the average one-year cost of NFIP flood insurance is about $700. NFIP insurance is usually the only flood insurance you can buy.

You likely will pay less if your home is in an area at low or moderate risk for flooding. In those areas, you probably qualify for the NFIP Preferred Risk Policy. For example, for about $400 a year you may be able to buy a policy that covers $200,000 in structural damage to your home and $80,000 in damage to its contents.

The risk rating for your area can change. This happens when the Federal Emergency Management Agency (FEMA) uses new information to update your area’s Flood Insurance Rate Map. For example, the new map could raise the flood risk level for your area from minimal to moderate or moderate to high. These changes would raise the cost of flood insurance.

If this is happening in your area, it is important to take action quickly. It still may be possible to get flood insurance at a lower rate. For example, if you currently have flood insurance, you may be able to keep paying the lower annual cost for at least one more year when you renew your policy. You also may be able to get a lower rate for at least a year if you buy flood insurance before the effective date for the new rate map.

The NFIP calls these lower-rate options “grandfathering.” These grandfathering rules can be complicated, so ask your insurance agent for an explanation and advice.

Other factors that can affect how much you pay include:

  • Where you live
  • When your home was built
  • The elevation of your home’s lowest floor
  • The number of floors/levels in your home
  • The building materials used in your home
  • The deductible you choose
  • The amount of coverage you buy
  • Whether you want contents coverage to include damage to things below ground level, such as in your basement

How Much Coverage You Should Buy

In an ideal situation, you would buy building coverage that equals the value of your home.

You would also buy contents coverage that equals the value of the things in your home that are covered by the policy. If that is not possible, it would be best to buy enough contents coverage to pay for the value of the most important things you own inside your home.

For example, you find that the most important things you own in your home are valued at $40,000. So you buy flood insurance with contents coverage of $40,000. That means the insurance company is agreeing to pay you as much as $40,000 to repair and replace things that are damaged by a flood.

This value is usually based on what those things are worth now. It is not based on how much you paid for them. Your insurance company can help you determine what the value of those things is now.

You might decide that it costs too much for you to buy flood insurance that covers the full value of your home or the most important things you own. In that case, you will need to make a personal decision about how much coverage you can afford and need.

Who Is Required to Buy Flood Insurance

Everyone should buy flood insurance. But sometimes you must buy it as a condition of your home loan.

Your mortgage company will require you to buy flood insurance if:

  • You are buying a home in an area at high risk for flooding. (This is sometimes called a Special Flood Hazard Area.)
  • Your home is in a location that is reclassified as a high-risk flood area.
  • Although not federally mandated, some lenders may require flood insurance for homes located in moderate-risk flood areas.

You also must buy flood insurance if you live in a Special Flood Hazard area and:

  • There is a flood and you want to receive federal assistance to help you pay for your flood damage. To get this disaster assistance while you still live in your current home, the federal government will give you the money only if you also agree to buy flood insurance. You must maintain this insurance for as long as you own the home. If you sell your home, you must let the new owners know that they are required to maintain this flood insurance coverage.
  • You received federal disaster assistance after a flood, and you want to be eligible for federal assistance if your home floods again.

When you must buy flood insurance in order to receive federal disaster assistance, you will have two options:

  • Purchase a Group Flood Insurance Policy from FEMA. This policy costs $600 for three years of coverage. FEMA pays for this policy. To make this payment, FEMA lowers by $600 the maximum amount of disaster relief money you are allowed to receive. After the three years are up, you must buy an individual flood insurance policy to maintain your coverage.
  • Purchase an individual flood insurance policy. FEMA calls this “standard flood insurance.” One advantage of purchasing an individual policy is that you can pay to receive as much as $100,000 in coverage for damage to your belongings and $250,000 for damage to your home. Under the group plan, the total coverage is limited to $34,900.

How to Buy Flood Insurance

Starting the process for buying an individual/standard flood insurance policy is easy. Here are some simple steps to follow:

  1. Contact the insurance agent at the company that provides your homeowners insurance.
    1. If you do not have an insurance agent, you can check this list for insurance companies that sell NFIP flood insurance policies.
    2. You also can contact the NFIP Referral Call Center at 800-427-4661. Ask the person on the phone to refer you to an agent who sells flood insurance.
  2. Your insurance agent will help answer your questions on what coverage is right for you. The agent will tell you how much the insurance will cost or give you an estimate.

NFIP flood insurance rates do not differ from company to company or agent to agent. That means the price you pay for the insurance itself should be the same no matter which agent you buy it from.

Questions to Ask the Insurance Agent

Here are some examples of helpful questions to ask your agent:

  • Does my community participate in the National Flood Insurance Program? If yes, you know flood insurance is available in your community.
  • What is the level of flood risk for my home? This level of risk will affect the price you pay for insurance.
  • Do I qualify for a Preferred Risk Policy? This is a policy for homes in areas at low or moderate risk for flooding. If you qualify, you will be able to buy flood insurance for less money.
  • Is FEMA updating the Flood Insurance Rate Map for my area? An update could change the risk level for your area, which affects how much the insurance will cost. If FEMA is updating the map, ask what steps you can take to avoid getting pushed into a higher-cost policy.
  • Does my community participate in the National Flood Insurance Program’s Community Rating System?This is important because you might be able to buy cheaper flood insurance if it does.
  • Are there any steps I can take to reduce the cost of my flood insurance?
  • What will the policy cover? You want to know exactly what things inside your home the insurance will help you repair or replace if a flood damages them.
  • What things will not be covered?
  • Will the policy pay for damage to things on every floor of my home? Make sure to ask about damage to things in your basement, if you have one.
  • Will my building coverage be for actual cost value or replacement cost value? You will get paid more for damages with replacement cost value coverage. On the other hand, replacement cost value is not always an option. It also can increase the amount you pay for the insurance.
  • Do you charge any agency fees? If so, what are they?
  • Are there any other charges? All policies include certain fees and surcharges. Ask so you will not be caught by surprise.
  • How can I pay for my policy? Ask about checks, credit cards, money orders, and cash.
  • How will I renew my policy? You have to pay the insurer each year to keep your plan. Ask the agent how the insurance company will let you know when it is time to renew, and ask what you will have to do in response.

Questions the Insurance Agent Might Ask You

Your insurance agent will ask you some questions at the start to figure out your flood insurance coverage options. The answers you provide will help determine the price you pay for insurance.

  • Where do you live?
  • Do you own or rent your home?
  • How many levels does your home have?
  • How many square feet is your home?
  • Where is the mechanical equipment in your home located? This could include things like your water heater and air-conditioning equipment.
  • Have you done anything to lower the flood risk for your home?
  • What is the value of the things you own in your home? Do not worry if you cannot answer this right away. You and the agent can discuss how to figure out this value.
  • Do you have any receipts that show how much you paid for the things you own in the home?
  • Do you have an elevation certificate? This question applies only to homes in high-risk areas. This certificate shows your home’s elevation, so the elevation can be compared with the estimated height that floodwaters will reach in a major flood.