What Is Flood Insurance? And When Is It Required?

General homeowner’s insurance policies don’t cover flood-related damages. While they might extend to plumbing-related flooding, if your home is flooded due to a storm, hurricane, or another natural disaster, they won’t be of much help at all.

In these situations, you’d want what’s called flood insurance — a type of catastrophic insurance policy that protects you from flood-caused damages and financial loss.

How flood insurance works

From a claims perspective, flood insurance works like any other policy. If your home is flooded and is damaged as a result, you’d file a claim with your insurance company. You’d then pay your deductible, and your insurer would cover the repairs and other costs per your coverage agreement.

The main difference between this type of insurance and other insurance policies is that the U.S. government sets the premiums. Thanks to the National Flood Insurance Program, there’s no shopping around or comparing one insurer to the next. Just contact your local insurance agent, ask about getting an NFIP plan for your home, and as long as your community participates in the program, you’ll enjoy the same rates and coverages as every other homeowner who qualifies.

If your community doesn’t participate in NFIP (which is rare), you can get a policy through a private insurer. In some cases, these may be more comprehensive — though costlier — than an NFIP program. 

Do you need insurance for flooding?

Many mortgage lenders require this type of insurance before they’ll grant a loan on a property. This is especially true in areas with high flood risk. 

If you’re buying a home, be sure to ask your lender if you’ll be required to get a flood insurance policy before closing on your home. For one, you’ll want to factor these costs into your budget. Additionally, you will need to secure the policy early, so that it doesn’t delay your closing date.

In the event your lender doesn’t require flood insurance, it could still be a good idea. Use FEMA’s flood mapping tool to gauge your home’s flood risk. If your findings have you worried, consider getting a policy. NFIP rates are extremely low and usually only cost homeowners a few hundred dollars per year.

Is this type of insurance for you?

If you’re still not sure about getting flood insurance, talk to your real estate agent. Do they recommend it? Are other homeowners buying it? You can also seek out a local insurance agent and see what they’d advise.

Finally, talk to your loan officer. Depending on where you live, you may not have a choice and will need to start securing your policy ASAP.