Most standard homeowners insurance policies don’t cover water damage caused by flooding, so if your home is damaged and you’re one of the 85% of homeowners without coverage, you may be left covering repair costs yourself.
Fortunately, there’s at least some financial relief options for uninsured homeowners, as both FEMA and the Small Business Administration offer their own forms of aid in the wake of a natural disaster. [1]
FEMA disaster grants
If you live in a federally declared disaster area, you can apply for financial assistance through FEMA’s Individuals and Households Program (IHP). These grants can help pay for everything from house repairs to additional living expenses and other expenses or needs not covered by insurance.
How does FEMA determine payouts?
The limit for FEMA IHP grants is $36,000, and money can be used for the following:
Home repairs: FEMA funds can be used to help cover the cost of home repairs, including floodwater removal and new flooring or drywall. Funds can also be used to pay for flood mitigation measures, including hurricane-grade roof shingles, elevation of furnaces and water heaters above ground, and elevation or relocation of electrical panels.
Temporary housing: If your house is unlivable due to flood damage, FEMA can pay for temporary rentals or hotel stays until your home is repaired. These funds are typically available in one- to three-month increments for up to 18 months after a federally declared disaster.
Other needs: Financial assistance is provided for all necessary expenses directly caused by the disaster, including medical expenses, meals, childcare costs, damage to essential vehicles, and moving and storage expenses.
In addition to providing relief for those who don’t have flood insurance, the program can also provide additional funds to those with maxed out flood insurance coverage limits who need more money to pay for repairs. You’re also eligible for IHP money if your home was flooded but the damage doesn’t meet your policy deductible.
Learn more >> What does flood insurance cover?
How much does FEMA pay for personal property?
With FEMA disaster grants, you can use the money to pay for essential personal property and other necessary expenses. If you’re approved for an SBA disaster loan, you can use up to $40,000 to replace damaged personal property.
Do you have to pay FEMA back?
If you received money through FEMA’s Individuals and Households Program, you do not have to pay it back. But you do have to repay disaster loans received from the Small Business Administration.
Eligibility requirements
To receive FEMA disaster assistance, you need to be a resident of a federally recognized disaster area. After the president declares a major disaster, FEMA will then define the “disaster area,” or the county or counties eligible for federal aid.
In addition to living in a disaster area, your home must be your primary residence, or the place you live most of the year. If the home is a seasonal residence or an investment property, you won’t be eligible for FEMA payments.
Lastly, if you live in a special flood hazard area and you don’t have flood insurance, you’ll only be able to use FEMA disaster assistance once. After that, you’ll need to purchase flood insurance to be eligible for future disaster aid.
Learn more >> When is flood insurance required?
SBA disaster loans
If FEMA grants aren’t cutting it, you can apply for a low-interest disaster loan through the Small Business Administration.
How do SBA disaster loan payments work?
SBA disaster loan payments can help cover expenses that aren’t covered by insurance or FEMA grants. Once approved, you can use the money for the following:
Up to $200,000 to repair or rebuild your home. The damaged residence must be your primary home, not a seasonal home
Up to $40,000 to replace damaged property, including clothes, furniture, vehicles, electronics, and appliances
Up to $200,000 to refinance your mortgage. This option is only available if you can’t get credit elsewhere and if you plan to make repairs using the disaster loan.
Eligibility requirements
Like FEMA grants, SBA disaster loans are only available to residents of federally declared disaster areas who utilize the home as their primary residence. The loan can only be used to pay for damage to your primary residence and personal belongings. If you have a home office that you use for business purposes or to store business equipment, you’ll need to take out a separate SBA business loan.
If you’re not eligible for credit elsewhere, the maximum interest rate on SBA disaster loans is 4%. If you can get credit elsewhere, the maximum interest rate is 8%. Loan repayment terms last up to 30 years.
If you’re in need of disaster aid, you can apply for an SBA loan online, by mail, or in person at a FEMA Disaster Recovery Center. [2]
Private flood insurance may offer a shorter waiting period than the NFIP
Flood insurance purchased through the National Flood Insurance Program (NFIP) has a waiting period of 30 days if the policy isn’t tied to your mortgage. But this won’t be of much help if you’re purchasing flood insurance ahead of a potential storm, as the house won’t be covered until after the waiting period (and storm) has passed.
Fortunately, private flood insurance is a more than adequate alternative to the NFIP, offering waiting periods of anywhere from 0 to 10 days, higher building and personal property coverage limits, more robust coverage, and it often costs less depending on where you live.
On the flip side, private flood insurance is written and managed by private insurers who aren’t regulated to the same degree as the NFIP. So if your house suffers extensive flooding, your insurer may be within their right to drop you from coverage after a claim. With NFIP flood insurance, you don’t have to worry about losing your coverage.
But the bottom line is either form of coverage is a better alternative to relying on FEMA emergency funds, says Mark Friedlander, spokesman for the Insurance Information Institute.
“Relying on FEMA emergency funds is not a substitute for having adequate property insurance and flood insurance coverage,” Friedlander says. “It is a very complex process to get approved for a FEMA grant and you typically only get a very small portion of funds to cover losses to your property.”
Learn more >> The best flood insurance companies in the U.S.
Frequently asked questions
How much does flood insurance cost?
The average cost of flood insurance in the U.S. is $738 per year, as of 2022. But your own flood insurance rates will depend largely on your home’s location and how much coverage you need.
Does FEMA pay for flood damage?
Yes, FEMA can pay for home repairs, personal property replacement, relocation costs, and other necessary expenses if your house is damaged by a flood. Federal aid is provided in the form of FEMA disaster grants and SBA disaster loans.
