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6 tips on how to shop for flood insurance

tips for buying flood insurance People who buy homeowners insurance still lack at least one essential protection: flood insurance.

Flood damage occurs in 90 percent of all natural disasters that occur in the United States, according to the nonprofit Insurance Information Institute (III), making it the nation's most common natural disaster. 

Homeowners living far from coastlines may think they can skip flood insurance. But nearly 25 percent of flood claims are paid to people who live in areas considered to be at low to moderate risk for flooding, according to the Federal Emergency Management Agency (FEMA).

For example, in September 2014, Arizona was hit with torrential rain storms that triggered flash flooding. The floods were the most severe since Phoenix weather records began in 1895.

Here are six tips to keep in mind when purchasing flood insurance to protect  your home.


tips for buying flood insurance basics 1. Understand flood insurance basics

In the United States, the federal government provides flood insurance to homeowners, renters and businesses through the National Flood Insurance Program (NFIP).

When purchasing coverage, be aware flood insurance comes in two separate policies – one for contents and one for your structure. 

Structural coverage reimburses damage to your home, while contents coverage reimburses losses related to personal possessions.

NFIP places limits on how much protection it will provide. For residential properties, the government has a limit of $250,000 for structural coverage. Both homeowners and renters can insure their contents for up to $100,000.

Most homeowners who buy a policy have to wait 30 days until it goes into effect. 

Flood insurance is optional for people who own their home outright. But if you have a mortgage, your lender may require you to purchase a policy.

In addition, you must purchase coverage if you live in an area at a high risk of flooding and you got your mortgage through a federally regulated or insured lender – for example, a mortgage insured by the Federal Housing Administration.


tips for buying flood insurance private coverage 2. Decide whether you need private coverage

Most homeowners purchase all of their flood insurance coverage through NFIP. Such coverage is relatively cheap because the government keeps premium prices artificially low by not fully pricing in the risk of flooding.

Some private insurers also sell flood insurance. However, it isn't widely available and tends to be more expensive than NFIP coverage because it fully prices in flood risk, says Loretta Worters, a vice president at the III.

Because of this extra expense, flood insurance sold by private insurers makes sense mostly for people who want coverage levels above the government's coverage limits.

In such cases, the homeowner can purchase an NFIP policy, then buy a separate policy from a private insurer to cover any damage above NFIP coverage maximums.


tips for buying flood insurance preferred rate 3. Find out if you qualify for a preferred rate

NFIP says the average flood insurance policy costs $650 a year. But many factors can influence this pricing, including:

  • Where your property is located and its elevation level.
  • The risk of flooding in the area.
  • How much insurance you purchase.
  • Which items you decide to cover.
  • The deductible amount you choose.

If your home is located in a low- or moderate-risk area, you likely will qualify for a combined building and contents policy at a preferred rate. So, you might pay just $129 annually for a policy that provides $20,000 in building coverage, and $8,000 in contents coverage.

However, before settling on a coverage amount, note that between 2008 and 2012, the average flood insurance claim topped $38,000, according to NFIP.

A flood insurance agent can tell you whether or not you live in a low- or moderate-risk area, according to a FEMA spokesman.  You can also find out more by visiting, the official NFIP site.

Homeowners who live in a high-risk area must purchase a standard-rate policy. They can buy a combined building and contents policy, or coverage for just one aspect or the other. 

Costs in high-risk areas can be much higher. For example, a standard-rated policy that combines $35,000 of building coverage with $10,000 in contents coverage might cost $572 annually.


tips for buying flood insurance whats covered 4. Understand what's covered

If you have building coverage, the structure of your house and its foundation are protected in the event of a flood. So are the electrical and plumbing systems.

Garages typically are insured up to 10 percent of the building property coverage limit.

Other things that are covered include:

  • Central air conditioners and furnaces.
  • Water heaters.
  • Refrigerators.
  • Permanently installed carpeting, paneling, wallboard, bookcases and cabinets.
  • Window blinds.

Contents coverage will cover items including clothing, furniture and your electronic equipment. Valuables such as furs or artwork generally are covered up to $2,500.


tips for buying flood insurance what isn't covered 5. Know what isn't covered

Even if you purchase flood insurance, some things won't be covered.

For example, flood insurance will not cover damage resulting from moisture, mildew or mold that the homeowner could have prevented.

An example of such damage would be mold that forms because a homeowner didn't take steps to dry out a home promptly after a flooding event, according to a FEMA spokesman.

Flood policies also don't cover losses caused by sewer or drain backup. For such coverage, you would need to purchase a sewer and drain backup endorsement to your homeowners policy.

There's no coverage for items that surround the insured structure, including trees, decks, patios and swimming pools.

You can find out more about what is and isn’t covered in NFIP's Summary of Coverage document.


tips for buying flood insurance basement 6. Beware your basement

For millions of homeowners, the basement is the place most at risk for flood damage. However, you’re especially unlikely to have flood insurance protection in this area. 

"Coverage for basements under the National Flood Insurance Program policy is very limited, and won't cover all the stuff in your basement," says Carole Walker, executive director of the Rocky Mountain Insurance Information Association.

That can pose a problem for homeowners who turn their basements into apartments, with full kitchens or living rooms. 

Basement areas that don’t qualify for flood coverage include:

  • Ceilings.
  • Finished walls.
  • Floors.
  • Personal belongings.

Flood insurance building coverage protects a few items in your basement that are necessary to support your structure, including the furnace, water heater or circuit breakers, as well as some items like washers and freezers.  

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