Flood insurance provides coverage against property damage or loss caused by flooding. According to the National Flood Insurance Program, flooding is the inundation of at least two acres of dry land or at least two properties. This could be caused by natural disasters such as hurricanes or earthquakes. About a third of U.S. homeowners believe regular home insurance policies cover flood damage; however, most home insurance policies do not cover this type of damage. Umbrella insurance policies also do not cover damage caused by floods.
Currently, only about 20 percent of homes in areas at a high risk of flooding are covered by flooding insurance. This insurance is most important for people living in flood plains, flat areas with high elevation on either side that are prone to flooding. In some areas with a high flooding risk, the federal government requires homeowners to have flooding insurance in order to secure a mortgage that is backed by a federal agency. However, any homeowner can purchase this insurance. A quarter of flood claims occur for homes that are not in flood plains or high-risk areas.
Flood-related damage costs U.S. homeowners over a billion dollars every year. The average flood claim is between 30 and 40 thousand dollars, and typical flooding insurance costs a homeowner about 600 dollars a year.
Types of insurance policies for flooding coverage vary. Homeowners can purchase more basic policies that just cover their home and property. Other, more extensive policies will also cover any valuables lost or damaged during the flood, such as furniture or other possessions. Insurers often look at topographical maps that show flood plains to determine a home’s flooding risk. Renters can also purchase flooding insurance that covers just their possessions. Most insurance policies do not go into effect until 30 days after the homeowner purchases the policy.