IRMI Tip of the Month: Do You Really Need Flood Insurance?

According to the Federal Emergency Management Agency (FEMA), flooding can cause several billion dollars of property damage in the United States each year. If you are like many homeowners, however, you may be unaware that the standard homeowners insurance policy you buy does not cover flood losses. You may believe that you have a low risk to this peril but FEMA reports that approximately 25 percent of all flood claims occur in communities in which flooding is deemed to be a low to moderate risk. So do you really need a separate flood policy? The following tips and ideas may prove helpful in answering this question.
  • Contact your insurance agent to see if you live in a community that participates in the National Flood Insurance Program (NFIP), a prerequisite in order to qualify for flood insurance. Participating communities must agree to adopt and enforce certain floodplain management regulations, including building construction and zoning laws that minimize the risks of flood damage.
  • Ask your insurance agent to see if you are in a floodplain. Or, if you prefer, go to and select “What’s Your Flood Risk?” which will ask you to enter your home address. This Web site will then specify whether you are in a low, moderate, or high risk area.
  • Consider purchasing flood insurance even if you are in a low-to moderate-risk community. In these areas, you may be eligible for the Preferred Risk Policy, with premiums as low as $112 per year including coverage for your personal property.
  • Note that a flood policy does not take effect until 30 days after you purchase the coverage. Thus, if the local meteorologist announces a flood alert for your community and you try to purchase coverage, it is already too late.
  • The maximum limit of insurance in the NFIP for your home itself is $250,000. If your residence’s value exceeds this amount, ask your insurance agent about excess insurance for losses above the federal policy’s maximum limits.
  • Don’t assume that the government will bail you out if you suffer a flood loss and don’t have a flood insurance policy. That decision is a gamble you may not win. Remember that federal disaster assistance, if available, is usually a loan that must be paid back with interest.
  • Discuss all the pros and cons of flood insurance with your agent before making your final decision.