What is flood insurance?

Flood insurance is a kind of property insurance that covers losses due to water damage from flooding. A flood event may include damage caused by heavy or prolonged rain, storm surges along the coast, levee or dam breach, blocked storm drains, and sewage system backup. Standard business and homeowners insurance policies will cover water damage due to a sudden and accidental event, such as a burst pipe or tornado, but do not cover flood damage. This means you will need a supplemental flood insurance policy to cover property damage caused by floodwater. You can obtain a flood insurance policy for any residential or commercial property.

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When do I need to be aware of flood insurance?

Every property is in some type of flood zone, and flood insurance is mandatory in certain zones. Even if you don't live in a flood-prone area, you may need flood insurance. Many events can cause floods, such as unusually heavy rain, a change in your area's drainage system due to construction, or a pipe in your house that has corroded over time. Flood insurance is also required if you apply for a mortgage with federal backing in a federally designated flood zone.

What is important to know about flood insurance?

The federal government offers flood insurance through the National Flood Insurance Program, or NFIP. It is available to homeowners in floodplains designated by the NFIP as well as in participating communities. Typically, there is a 30-day waiting period for an NFIP policy to go into effect. There are some other important items you should know about flood insurance:

The NFIP is managed by the Federal Emergency Management Agency, or FEMA.
The federal government sets the rates for National Flood Insurance Program policies.
The government offers NFIP policies through private insurers.
The cost of NFIP flood insurance is determined by several factors, including the property's age, number of floors, elevation, and the NFIP-designated flood zone where the property resides.
FEMA updates flood zone designations as weather patterns change and intensify, assigning risk ratings to different zones.
Flood insurance is mandatory in all FEMA-designated A zones because of the high potential of flooding.