How much flood insurance do I need?

If you live in a high-risk flood area and you have a mortgage on your home, your lender will likely require you to purchase flood insurance. Federal law states that any entity issuing a government-backed mortgage — such as an FHA or VA loan — must, by law, require the borrower to purchase flood insurance if the mortgaged property is in a special flood hazard area (SFHA).

While you should aim to have enough flood insurance to cover the cost to rebuild your home from the ground up in the event of a major flood, you're only required to purchase an amount that meets the minimum coverage requirements laid out in your mortgage contract — which may be less than the amount your actually need. Read on to learn about how much flood insurance you need for a mortgage and how to calculate your coverage needs.

How much flood insurance do you need for a mortgage?

The amount of flood insurance you're required to purchase will depend on what type of mortgage you have and your specific loan agreement.

For example, loans secured by Fannie Mae and Freddie Mac have flood insurance coverage requirements for mortgaged properties in high-risk flood areas, but these requirements differ from FHA and VA loan flood insurance requirements.

Keep in mind if you have a mortgage through a private lender, they can still require you to purchase flood insurance, they're just not mandated by law to do so.

Fannie Mae and Freddie Mac flood insurance requirements

Mortgages secured by Fannie Mae and Freddie Mac require a minimum building coverage amount equal to the lesser of the following if any portion of the property is in an SFHA. [1]

• 100% replacement cost value of the home

• The unpaid principal balance of the mortgage

• The maximum amount of building coverage ($250,000) sold by the NFIP

Homeowners with these mortgages also have the option of purchasing private flood insurance as long as the policy is issued by a licensed carrier and provides coverage as broad as the NFIP's. [2] Private flood insurance policies generally have a higher maximum flood insurance coverage limit, broader coverage for personal belongings, and additional protections not available through the NFIP.

FHA and VA loan flood insurance requirements

Mortgages guaranteed by the Federal Housing Administration and Department of Veteran Affairs require flood insurance for any structure fully or partially in a high-risk flood zone. The minimum amount of coverage required must be at least as much as the full replacement cost of the home, or the cost to rebuild from the ground up.

If the property's full replacement cost is greater than the $250,000 building maximum offered through the NFIP, homeowners have the following options:

• Private flood insurance coverage equal to 100% of the home's rebuild cost

• A maxed-out NFIP policy with additional excess flood or difference in conditions (DIC) insurance

If you're not able to find additional insurance to cover the home's full rebuild value, the lender is permitted to accept a policy with the maximum coverage amount available through the NFIP.

How much flood insurance do I need?

Just one inch of water can cause around $25,000 in home damage and $3,000 in damage to your possessions, according to the Federal Emergency Management Agency (FEMA). [3]

And while homes in high-risk flood zones are generally the most at risk of expensive damage, there are nearly twice as many properties with significant flood damage risk than previously thought. In other words, many homes currently in low, moderate, or undetermined risk areas according to FEMA maps are actually located in high-risk flood zones. [4]

Given how much damage just a little bit of flooding can do to a home and the unmapped risk which is only expected to increase due to climate change, you should consider getting enough flood insurance to cover the cost to rebuild your home and replace all of your belongings.

• How to determine your building coverage limit: When setting your building coverage limit, you'll want to make sure it's equal to the home's replacement cost value — it should not based on its market value or the value of the land. The dwelling coverage limit in your homeowners insurance policy is a good barometer of how much flood insurance you’ll need. For something more precise, contact a certified replacement cost appraisal or use an online flood insurance calculator

• How to determine your personal property coverage limit: To set your personal property coverage limit, add up the value of all of your personal belongings inside the home. Setting up a home inventory with property descriptions and prices is an effective and convenient way to figure out the value of everything you own.

In addition to these coverages, you'll also want to consider additional coverages included in the policy or offered as an add-on, including coverage for temporary living expenses or replacement cost personal property protection.

Learn more >> Guide to flood insurance coverage

NFIP vs. private flood insurance coverage limits

The National Flood Insurance Program (NFIP) has long been the standard flood insurance provider on the market, and still accounts for roughly 95% of active policies. With NFIP flood insurance, private insurance companies sell the policies and settle claims on behalf of the federal government, but the government is responsible for claim payouts.

But this policy isn’t ideal for high-value homes (exceeding $250,000 in rebuild value) due to the program’s strict coverage maximums. For additional protection, consider something like supplemental excess flood insurance or a private flood insurance policy.

Coverages and guidelines	NFIP	Private flood insurance
Buildings coverage	Maximum: $250,000 (replacement value)	Maximum: $2,000,000 or higher (replacement value)
Contents coverage	Maximum: $100,000 (actual cash value)	Maximum: $1,000,000 (replacement value)
Additional living expenses	N/A	Maximum: $50,000
Debris removal	Maximum: $250,000	Maximum: $500,000 or buildings coverage maximum (whichever is less)
Loss avoidance coverage	$1,000	$1,000
Deductible	Minimum: $1,000	Minimum: $500
Elevation certificate	Required	Not required
Waiting period	30 days	As little as 10-14 days
Accepted by mortgages	Yes	Yes
Availability	All 50 states	May be limited in higher-risk areas

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Learn more >> National Flood Insurance Program vs. private flood insurance

Consider excess flood insurance if you need more coverage

Excess flood insurance works like this: Let’s say you maxed out the full $250,000 in building property coverage, but your home’s actual 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 in a flood. Excess flood insurance essentially fills that gap in coverage.

In addition to increasing your buildings and contents limits, excess flood insurance may also include additional protection like additional living expenses coverage to pay for added living costs like meals and hotel stays after a flood evacuation. If you have coverage through the NFIP and your home is in a particularly high-risk area, excess flood insurance is a smart option.

Learn more >> The best flood insurance companies in the U.S.

Can you reduce or opt out of flood insurance requirements?

Flood insurance can be prohibitively expensive in the most high-risk areas, so if you’re wondering how you can minimize or opt out of flood insurance requirements, you’re probably not alone. There are a few things you can do to lower the cost of coverage or potentially become exempt from flood insurance requirements.

Change your flood zone designation

If you believe the NFIP incorrectly determined that your home was in a Special Flood Hazard Area, you can submit an application to FEMA to request a change in flood zone designation. 

Once FEMA reviews the request, they will issue a response either denying or accepting the map change request, also known as a Letter of Map Amendment (LOMA). If the map revision is approved, be sure to show this document to your lender to have the flood insurance requirement removed. 

Consider private flood insurance 

Private flood insurance is often cheaper than NFIP coverage, not to mention the coverage itself is superior. If you’re looking for cheaper insurance alternatives, your best bet as always is to re-shop your insurance.  

Learn more >> Average flood insurance rates by zone & state

Refinance into a nonconforming mortgage

If you have a government-backed or conventional mortgage on your home, your lender is typically required by law to require flood insurance. That isn’t the case, however, with home loans that aren’t required to meet Fannie and Freddie guidelines, or nonconforming mortgages. 

If you’re looking for a mortgage with less strict standards and insurance requirements, or you’re planning on refinancing anyway, look into a nonconforming mortgage with a private lender.

Who needs flood insurance?

Flooding impacts almost every county in the U.S., so every home that is at or below the base flood elevation (BFE) probably should have flood insurance. [5]  

There are a number of different flood 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. If by chance you have a nonconforming/unregulated mortgage that doesn’t have the flood insurance requirement, you’re going to want coverage 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. This 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 lender or local floodplain administrator for more information about flood risk in the community.

Frequently asked questions

Why do mortgage lenders require flood insurance?

Mortgage lenders have a financial interest in protecting your property from catastrophic events, including tornadoes, wildfires, and flooding. While just about every lender requires homeowners insurance, flood insurance is usually only mandatory if your home is in a high-risk flood zone.

How much does flood insurance cost?

A flood insurance policy through the NFIP costs around $700 annually, but the cost of your own policy will depend on which flood zone you’re in and the BFE of your property.

How do you save money on flood insurance?

Short term, your best bet may be to shop around and check prices with private flood insurers. Long term, consider retrofitting your home. Raising your home’s elevation or moving systems and utilities (like water heaters, electrical and plumbing) above the BFE can all result in lower rates. Filling in crawl spaces and basements can also lead to lower flood insurance premiums.