Q

Do I need flood insurance for my mortgage?

A

Flood insurance is required if you live in a high-risk flood area and your home is mortgaged with a federally regulated or insured lender.

Pat Howard 1600

By 

Pat Howard

Pat Howard

Senior Editor & Licensed Home Insurance Expert

Pat Howard is a senior editor and licensed home insurance agent at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.

Updated October 29, 2021 | 4 min read

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Flooding is the most common and costly natural disaster in the U.S. — it impacts nearly every county across the country and just a single inch of water in your house can cause up to $25,000 in damage. [1] [2]

But flood damage generally isn’t covered by homeowners insurance, so if your home is damaged by flooding and you don’t have flood insurance, you’ll have to pay out of pocket for repair costs. 

Since mortgage lenders have a financial stake in your home when they extend you a loan, they’ll often require flood insurance if the property is in a high-risk flood zone. In this guide, we’ll explain when lenders require flood insurance and whether or not it’s worth the cost.

Key Takeaways

  • Flood insurance is sometimes required by mortgage lenders if you live in a flood zone that’s determined to be “high risk” by the Federal Emergency Management Agency

  • If your home is in a high-risk flood zone (A zones and V zones), you may need to buy flood insurance 

  • Flood insurance is available through FEMA’s National Flood Insurance Program — the primary source of flood insurance in the U.S. You can purchase NFIP coverage if you live in a participating community

  • If your mortgage lender requires flood insurance, you’ll likely need to pay for it until your mortgage is paid off

When is flood insurance required?

Flood insurance is typically required if your home is located in a federally recognized high-risk flood zone and you have a mortgage with a federally regulated or insured lender. Considering that roughly 97% of all new mortgages in 2020 were either insured or backed by the government, virtually every mortgaged home in a high-risk flood zone will need flood insurance. [3]

If your home is in a moderate to low-risk flood zone — zones B, C, or X — flood insurance isn’t required by law, but your loan servicer can still require you to buy it. Your mortgage requirements are ultimately going to come down to the agreement between you and your lender. 

Before closing on a mortgage, be sure to read the fine print of the contract so you understand the different obligations and expenses you’re responsible for.

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Do I need flood insurance?

If you live in a high-flood risk area, your lender will likely require flood insurance. But even if you don’t have a mortgage or your lender doesn’t require it, you should still consider flood insurance. 

Over the course of a 30-year mortgage, homes in high-risk floodplains have a one in four chance of being flooded, and are five times more likely to incur flood damage than fire damage. [4] That likelihood may be even higher if you live on the coast or by a river. 

You should also consider flood insurance if you live in a moderate to low-risk flood zone or an unmapped area close to a body of water. Over 40% of all NFIP claims filed from 2014 to 2018 were from policyholders outside of high-risk flood areas. 

It’s also estimated that existing FEMA flood maps haven’t accounted for up to 6 million properties located in 100-year floodplains, meaning areas with the highest flood risk. [5]

How to figure out if you’re in a flood zone

To find out if your residence is located in a flood zone, take the following steps:

  • Go to FEMA’s flood map service center

  • Plug in your home’s address

  • Find out your home’s flood zone

  • Pay attention to the last time the map was updated

The age of the map is important, because although your home may sit in a minimal flood hazard zone, that may not tell us much if the map was updated 15 years ago. If you suspect your community’s flood map is outdated, check with a local insurance agent to get their input on the area’s actual flood risk, or see if other residents in your area have flood insurance.

Where do I get flood insurance?

You can typically buy flood insurance from your homeowners insurance company. Nearly every major insurance company offers NFIP flood insurance to residents of participating communities, but some may also provide their own private flood insurance. In this section, we’ll walk you through the different types of flood insurance available to you.

1. The National Flood Insurance Program

NFIP flood insurance is backed by the federal government and provided by private insurance companies. Government flood insurance offers up to $250,000 in buildings coverage for your home, and you’re able to add up to $100,000 in contents coverage for your belongings if you choose. NFIP flood insurance only includes buildings coverage by default, so you’ll need to add contents coverage separately for an additional amount.

→ Learn more about NFIP policies

2. Excess flood insurance

Since NFIP coverage limits aren’t always high enough to pay for a full rebuild of your home or replace all of your belongings, many insurance companies offer excess flood insurance as a safety net policy. Excess flood insurance increases your coverage limits if the damage to your home exceeds $250,000 or if damage to your personal belongings exceeds $100,000. 

3. Private flood insurance

You also have the option of purchasing private flood insurance which is written and backed by private insurance companies instead of the government. Private flood insurance providers generally offer higher coverage amounts than the NFIP’s plan, and policies are often cheaper in lower risk areas.

Private flood insurance is typically available as a standalone policy or as an endorsement that you can add onto your homeowners insurance. 

➞ Learn about your flood insurance coverage needs here

How much does flood insurance cost?

As of 2021, the average cost of flood insurance through the National Flood Insurance Program is around $738 per year, according to an analysis of FEMA policy data. The amount you pay for flood insurance will depend on:

  • Your home’s flood risk: Your flood insurance rates are based primarily on your home’s likelihood of being flooded. If your house is in a high-risk flood zone, expect your rates to be north of $1,000.

  • Your coverage types and amounts: The more building or contents coverage you choose, the higher your flood insurance premiums will be. 

  • Your home’s age and build: The age and construction of your home will also impact your flood insurance rates. Homes without flood mitigation features, like flood openings or barriers, or home’s not built to modern floodproofing standards are likely going to cost more to insure. 

  • Your policy deductible amount: Your policy deductible is the amount you’re responsible for paying before flood insurance will cover your claim. A higher deductible means lower rates, but it also means you’ll be paying more out of pocket if you ever file a claim for flood damages.

Keep in mind that as of October 2021, FEMA changed how it prices flood insurance. The changes will increase flood insurance costs on roughly 77% of existing policies. The rate changes kick in for existing policies once they renew on or after April 1, 2022, so the cost of most active flood policies is still based on the old rating method.