Feb 23, 2021

Do I Need Flood Insurance?

Flood | by Cal Inman, CEO | 3 Minutes

Your need for food insurance is based on the level of risk of flooding in your area vs your tolerance for potential damage and expenses. If the risk of flooding is high and you are not willing to bear the costs, then flood insurance may be advisable. You can determine your flood risk using FEMA flood maps, flood insurance rates and other tools.

The U.S. Federal Emergency Management Agency (FEMA) estimates that around 13 million Americans are living within a 100-year flood zone. A 100 year flood zone does not mean the property will only flood every 100 years, but instead that there is a one percent chance it will flood in any given year. This is an estimate and varies.

Experts say that FEMA’s estimates do not capture a much larger threat to many more homes.

A 2018 scientific journal article in Environmental Research Letters concluded about 41 million people are exposed to flood risk. This figure includes risk from river flooding.

“The threat of frequent flood events is growing, thanks to climate change”, according to the Earth Institute at Columbia University. “And the number of people and properties at risk from climate change-related disasters — not just flooding — is growing, too.”

How to determine your flood risk?

FEMA flood maps provide a way to examine the risk of flood to your property. You can search your property by typing in your address and looking at the flood zone designations on the map. However, these maps are not as exact as they might be and rely entirely on historical data, and thus may not represent changes in risk due to factors such as climate change or nearby development. FEMA maps are being updated in 2021.

Another source is ClimateCheck, which offers a short and long term assessment of your flood risk, including how climate change could affect your property. A high risk score might prompt you to evaluate your insurance needs and seriously consider flood insurance. Simply, type in your address to get a detailed report.

Another source is Flood Factor, which evaluates past floods, current risks, and future projections based on peer-reviewed research from leading flood modelers. Type in your address to access the Flood Factor data

How to assess levels of damage from flooding

The average homeowner spends between $1,170 and $4,891 to restore or repair water damage, with an average of $3,030, according to Home Advisor which also provides a calculator based on your location and the severity of your damage. Water damage from flooding can be much more severe and that is where a good insurance policy can be critical. Severe flooding cannot cause structural damage or destroy the entire building.

Seven factors that help you determine the likely damage from a flood are:

  • Location
    The home's proximity to areas that flood will help you understand the risk and costs to make repairs. Some areas are more prone to substantial damage and necessitate major repairs.
  • Size of area damaged
    The larger a damaged area the more expensive it will be to repair it. Historic data helps you understand the severity of likely damage to what parts of your home.
  • What region you live in
    It is more expensive in some areas, due to labor costs and cost of materials, to make repairs from water damage. These tend to be high-cost urban areas.
  • Water still present
    If water is still present problems get messier, mitigation is more expensive and takes longer to repair. But with the help of water pumps, dehumidification equipment, and moisture absorbent materials, the water can be removed.
  • Areas of damage
  • The costs will vary depending on what was actually damaged. For example, hardwood floors often cause less damage than carpeted areas Another factor is the cost of the materials that need to be replaced or repaired.
  • Type of water
    The water’s condition can vary from clean to a hazard. Dirty water creates more problems and drives up the costs of repair. The worst case scenario is black water from sewage waste
  • Mold
    One of the worst parts about water damage is mold and mildew, which adds to a higher bill and create long-term headaches and health problems.

Flood Insurance, Yes or No?

Once you assess your risk and evaluate the likely costs of repairs in the event of a flood, you can make a smart decision about insurance. Then you must consider what type of insurance you need.

Government Insurance

Since 1968, the Federal Government has offered flood insurance through its National Flood Insurance Program. But it has limitations.

  • Dwelling limits are capped at $250,000 regardless of the home’s actual rebuild cost (the average rebuild cost in the US is $302,988).
  • Contents coverage is limited to $100,000 regardless of how much personal property you have.
  • Deductibles start at $1,000, and your personal property and dwelling have separate deductibles.

Private Insurance

The alternative to government insurance is flood insurance from a private company. Private insurers used to thumb their noses at the flood insurance market because measuring flood risk was not easy. Recently, however, the private insurance market has developed sophisticated data models to help predict, write policies, and evaluate flood risk.

Another problem with private flood insurance historically is that federal mortgage lenders could not accept private coverage. That changed in 2019 when federal regulators permitted lenders to accept private flood insurance. The only caveat is that  it must be comparable to NFIP policies or better.

The idea behind this change was to help people get affordable coverage so the government could ease out of the flood insurance market and reduce the government’s costs when disasters hit. After Hurricane Harvey in 2019, the federal government paid out $738 million for flood damage.


In summary, first determine your risk to flooding. Then assess the likely cost of repairs. Then evaluate insurance policies closely including premiums, scope of coverage, deductibles and claims history of the insurance company you do business with.