How Does Flood Insurance Work?


Although it is not included in standard homeowner's insurance policies, flood insurance is a necessity if you want to protect your home and personal belongings from water damage.

How It Works

The National Flood Insurance Program (NFIP), founded in 1968 by the federal government, is managed by the Federal Emergency Management Agency (FEMA) and offers affordable flood insurance policies to homeowners.

When losses are sustained as a result of flooding, the policy provides coverage of up to $250,000 and $100,000 for damages to the structure and contents, respectively. Business policy limits are $500,000 in each of these categories.

Unlike homeowner's insurance policies, the cash value -and not replacement cost- is distributed to the policyholder when a claim is filed and subsequently approved.

What Flood Insurance Covers

It is important to understand the inclusions and exclusions of flood insurance policies.

Structural Elements

The structure of the building and its accompanying elements are covered. These include:

  • Plumbing systems
  • Electrical systems
  • Major appliances
  • Windows and blinds
  • Finished Flooring
  • Finished Cabinets
  • Detached Garage

Personal Contents

Most personal belongings, with the exception of valuables over $2,500, qualify for coverage. These include:

  • Clothing
  • Furniture
  • Electronics
  • Portable appliances
  • Window decorations


External additions to the property, such as swimming pools and hot tubs, are not covered by flood insurance. In addition, the occupant is responsible for repairing any water damage done to the basement, with the exception of the air conditioning, heating and water systems.

Certain personal property, including cars and valuable currency, do not qualify for protection against water damage.

Any preventable damages caused by conditions preventable by the occupants, such as moisture and mildew, are also ineligible for coverage.

You are also responsible for covering temporary location costs if applicable, and cannot be reimbursed for monetary losses as a result of interrupted business activities.

Who Can Obtain Flood Insurance

Individuals who occupy properties, as either renters, homeowners or business-owners, can purchase flood insurance.

Those who are located in Special Flood Hazard Area (SFHA) areas are mandated by federal law to purchase coverage if their property is financed through a lender regulated by the government.

If you reside in a moderate-to-low risk area or have experienced flooding in the past, it may be wise to consider obtaining coverage.

On the other hand, those who do not fall under either of these categories may qualify for low-cost preferred risk policies, even if their lender does not require flood insurance coverage to satisfy the requirements of the loan.

How to Purchase Flood Insurance

Personal tenants and business owners nationwide can purchase flood insurance coverage for their property by:

  • Submitting an online request to
  • Contacting a local provider via the agent locator
  • Requesting a quote through your insurance provider
  • Calling 1-888-379-9531

Policy premiums range from $129 to $640 annually. The premiums for a particular property will remain the same, regardless of the provider, because the cost is determined by the federal government.

In some instances, premiums can exceed the maximum average, depending on factors including, but not limited to:

  • Amount of coverage
  • Deductible
  • Physical Location
  • Level of Risk
  • Property size and type
  • Date of Construction
  • Number of Occupants

Important Considerations

Please keep in mind that a 30-day waiting period applies to all new policies unless:

  • A home is being purchased in conjunction with a new federal loan product
  • The property is re-classified as an SFHA property
  • The lender demands that the property must have flood coverage
  • An option is available to add the coverage on the homeowner's insurance renewal notice

Payment Options

The NFP accepts various forms of payments, including cash, check, money order and credit card. The premium for the entire year must be remitted for coverage to apply.

Before selecting a flood insurance policy that best suits your needs, carefully review the terms and conditions to gain a better understanding of what is covered.

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