Flood – does my homeowners policy cover?

This is a popular question from most people before, during, or after a natural disaster.  It’s important to understand what is covered, fortunately, for me (knock on wood), I have avoided flood losses throughout the years (mostly due to property selection), but it’s important to understand in the event of a hurricane or flood, the standard homeowners and renters insurance does not cover flood damage.

Flood Coverage

Currently, flood coverage, is available in the form of a separate policy both from the National Flood Insurance Program – NFIP and from a few private insurers.

But this is destined to change, many private insurers are looking to have flood in the private market.  Considering the modeling capabilities even Third Party capital is hungry for this new form of risk.

The government program details can be seen below.

National Flood Insurance Program (NFIP)

The NFIP provides coverage for up to $250,000 for the structure of the home and $100,000 for personal possessions. The NFIP policy provides  replacement cost coverage for the structure of the home, but only actual cash value coverage for the possessions.

Replacement cost coverage pays to rebuild the home as it was before the damage.

Actual cash value is replacement cost coverage minus depreciation so that the older the possessions are, the less a policyholder will get if they are damaged. There may also be limits on coverage for furniture and other belongings stored in the basement.


Flood insurance is available for renters as well as homeowners.  Please see our article about Renters Insurance and what is covered under typical policy.  As more and more of our society revolves around renting assets, its important to understand the impact and what your responsibilities are as a renter.

Flood zone

I don’t live in a flood zone, but homeowners and renters will need flood insurance if the property is in a designated flood zone. Most lenders will require it as a condition of a mortgage and it is a smart coverage to buy.  But flooding can also occur in inland areas and away from major rivers.

I would also consider buying a flood insurance policy if my house could be flooded by melting snow, an overflowing creek or pond or water running down a steep hill (my properties don’t currently have these hazards).

Waiting period

This is something many people don’t realize or think about regularly.  Insurance is NOT meant to be bought when a loss is already occurring or about to occur.  Insurers have to protect themselves from adverse selection.

Therefore, it is always a good idea not to wait for a flood season or a warning on the evening news to buy a policy—there is a 30-day waiting period before the coverage takes effect.

Excess Flood insurance

Excess flood insurance is also available from some private insurers for those who need additional insurance protection over and above the basic policy or whose community does not participate in the NFIP. Depending on the amount of coverage purchased, an excess flood insurance policy will cover damage above the limits of the federal program on the same basis as the federal program—replacement cost for the structure and actual cash value for the contents.

Excess flood insurance is available in all parts of the country—in high risk flood zones along the coast and close to major rivers as well as in areas of lower risk—wherever the federal program is available.

It can be purchased from specialized companies through independent insurance agents, or from regular homeowners insurance companies that have arrangements with a specialized insurer to provide coverage to their policyholders.

Work with an Agent

An Agent or broker will help you understand the hazard of flood, your exposure, and the risk associated.  But the first place to start researching, is the flood map, and start quantifying your risk.

To find out whether private primary flood insurance is available in your area, contact your insurance agent.

The Future:

Hopefully the private market will be able to replace the government in the flood insurance space, in addition, we might see a new Insurtech company come in to make the flood insurance purchase easier, simpler, and faster.  Considering the ease of modeling with flood maps it would be a great opportunity to partner with Alternative capital providers to solve a problem for customers.

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Arnold Smith

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