How much flood insurance do I need?

When you’re deciding how much homeowners insurance you need, you factor in the replacement cost of the house, the property inside, and your combined assets to set your coverage limits. You also want to optimize your coverage to cover your home from whatever hazards are prevalent where you live.

Flood insurance works similarly, although instead of setting coverage limits for several components of coverage, you’re focused on just two: coverage for the structure of your home, and coverage for your personal property inside the home.

You’re also only concerned with one peril (flooding) rather than several, which can inform how much coverage you elect to buy. Since flooding ostensibly only affects property at or below the base flood elevation (BFE), you may only need enough flood insurance to cover property on the first floor of your home or whatever items are below the BFE.

How do I know if I need flood insurance

In short, just about every home with floors at or below the base flood elevation (BFE) should have flood insurance, as flooding impacts almost every county in the U.S. The BFE is the level to which flood waters will rise in your area in the event of a flood. Click here to find the BFE for your community. If your community’s BFE isn’t available, FEMA suggests consulting a floodplain administrator in your area for more information.

The FEMA flood map service also includes broader information about what flood zone you’re in. Your lender may require flood insurance based on which flood zone you’re in. There are a number of different risk areas, but they’re generally broken up into three distinct categories: high-risk areas, moderate to low-risk areas, and undetermined areas.

High-risk areas - A high-risk flood zone or special flood hazard area has at least a 1% chance of flooding each year. Homeowners in these areas with a federally regulated or insured mortgage are required to buy flood insurance. But if by chance you have a nonconforming/unregulated mortgage that doesn’t have a flood insurance requirement, you’re going to want to get covered anyway. Homes in high-risk flood zones have a 1 in 4 chance of flooding over the course of a 30-year mortgage, according to FEMA.

Moderate to low-risk areas - Moderate to low-risk areas have less than a 1% chance of flooding each year, but the possibility is still there. Federally-regulated lenders can’t require flood insurance in these areas, but it’s still highly recommended.

Undetermined-risk areas - These are areas that haven’t been mapped out by FEMA, which creates a degree of uncertainty around the home’s risk for both residents and insurance companies. If you live in an undetermined risk area, consult your local floodplain administrator for more information about flood risk in the area, or talk to homeowners in your community to see how common flood protection is in the region.

Assessing your flood insurance options

The following is a comparison between National Flood Insurance Program (NFIP) flood insurance and a sample private flood insurance product.

➞ Read our breakdown of the NFIP and private flood insurance here

Whether you’re getting standard National Flood Insurance Program (NFIP) flood insurance or a private flood insurance policy, your policy will be centered around two core coverages: buildings coverage and contents coverage.

Your buildings coverage reimburses you for flood damage to the structure of your home and any built-in appliances, and your contents coverage reimburses you for flood damage to the items inside your home, like furniture, clothing, jewelry, and more.

If you live in a Special Flood Hazard Area, your lender will require buildings coverage at the very least. Lenders will require that your home’s insured amount be equal to the following, whichever is the lesser of the three:

• The outstanding principal balance of the loan
• The maximum amount available under the NFIP for the type of structure you own. For homes, that amount is $250,000
• The insurable value of the property, or the home’s replacement cost

But you’ll likely need more coverage than simply the minimum amounts required by your lender. Unless your house is completely empty, you should also make sure you have contents coverage as well. When insured through the NFIP, you can get up to $100,000 in contents coverage, but keep in mind you’re only insured at items’ actual cash value.

For higher coverage limits, more comprehensive protection for your personal belongings, and additional coverage for additional living expenses if you’re forced to evacuate your home because of a flood, you should consider private flood insurance instead of NFIP coverage. Private flood insurers may also provide excess flood insurance that you can use to supplement your federal government policy.

Determining how much flood insurance you need

After going through the mortgage process and getting homeowners insurance, the last thing you probably want to do is think too long and hard about flood insurance coverage, but it’s a crucial form of financial protection that shouldn’t be overlooked. When determining your coverage amounts, consider the following:

• Evaluating everything you own and how much you suspect it’s all worth
• Determining how much it’d cost to gut and rebuild your home in the event of catastrophic flood damage
• Conducting a cost/benefit analysis of opting for maximum coverage amounts and paying more vs getting insured for the bare-minimum required by your lender and paying less

It’s also worth noting that your flood insurance needs are going to hinge largely on which flood zone you’re in. A home in a high-risk flood zone may be best served by a more comprehensive private flood insurance policy or excess flood insurance than a home in a moderate- to low-risk area.

NFIP coverage

National Flood Insurance Program flood insurance has long been the standard coverage on the market and still accounts for roughly 95% of active flood policies. There’s also a good chance your homeowners insurance company offers this federal-government backed coverage.

When your lender instructs you to get flood insurance, they’re typically referring to NFIP coverage. But keep in mind that this policy isn’t ideal for high-value homes, and if you’re looking for a fast, white-glove claims service in the event of a loss, you’re not going to find that here.

With NFIP coverage, you get up to $250,000 in replacement cost coverage for your home, actual cash value coverage for detached structures (like your garage or gardening shed) up to 10% of your buildings coverage, and $100,000 in actual cash value coverage for your personal belongings.

That could very well be enough protection if the replacement cost of your home is less than $250,000, but if it’s any higher than that, you’ll be best suited with excess flood insurance (to supplement your NFIP coverage) or a higher-value private flood insurance policy

Excess flood insurance

Excess flood insurance works like this: say you’re maxed out with NFIP buildings coverage but your home’s rebuild value is $350,000. That’s a $100,000 insurance gap that you’ll need to pay out of your own pocket in the event your home is destroyed by flooding. Excess flood insurance is essentially supplemental gap coverage provided by private insurance companies to supplement your federal government flood policy.

In addition to increasing your buildings and contents limits, excess flood insurance also features additional coverages like loss-assessment coverage and loss-of-use coverage to pay for added expenses incurred during a flood evacuation. If your home is in a particularly high risk area, excess flood insurance is the best way to prepare for the worst.

Private flood insurance

It’s become increasingly common for insurance companies to write and service their own financially backed flood insurance. Private flood insurance is a good alternative to NFIP coverage for a few reasons: coverage limits are higher, you can get replacement cost contents coverage, and coverage has been found to be cheaper in the most high-risk areas of the country.

You can find private flood insurance through excess and surplus carriers (carriers who only write flood insurance) or it may be available through your current home or auto insurance company.