Flood Coverage Gap: The Most Underinsured Risk in America

Two people with an umbrella in the rain

There are currently 5.1 million flood insurance policies in America. Flood experts have estimated that if all flood-prone properties carried flood insurance, the number of flood policies would be 30 to 35 million. So, why are only 15 percent of at-risk properties protected against flooding?


The answer is pubic perception. Here is a quick question to test your knowledge:


Which of the following statements about flooding and flood insurance is TRUE?

  1. Flood damage is covered under a standard homeowners policy.

  2. FEMA assistance is available after any flooding event.

  3. If your mortgage company does not require flood insurance, your home is not at risk of flooding.

  4. All of the above.

  5. None of the above.


The correct answer is E, none of the above. Flooding is typically not covered under a homeowners policy. FEMA assistance is only available if the flood is declared a federal disaster by the president, and even then, it is a loan that must be repaid with interest. You’ll be required to purchase a flood insurance policy before receiving FEMA assistance for flooding.


Perhaps the most dangerous misconception involves the mandatory purchase requirement. FEMA flood mapping separates American properties into two basic groups: low-to-moderate risk and high-risk. By law, only the high-risk properties are mandated to carry flood insurance for federally-backed mortgages. So are the low-to-moderate risk properties truly safe from flooding?


The answer is no. A quarter of all flood claims come from low-to-moderate risk areas, and those only account for the properties that were protected by flood insurance at the time of the loss, and were thus able to file a claim. FEMA flood maps are often decades out-of-date, and not based on the sophisticated risk assessment tools that are available today. Eighty percent of the $125 billion in flood damages caused by Hurricane Harvey were in low-to-moderate risk areas, and the pattern has continued with Hurricanes Michael and Florence. Americans are suffering devastating flood losses on properties that they did not realize were at risk of flooding.


Flood insurance in low-to-moderate risk zones is inexpensive. This may change, as FEMA works to update mapping and zoning to more accurately reflect true flood risk. In the meantime, you can protect your home for less than $500 per year, and help America get one step closer to closing the flood coverage gap.  
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| April 2019
What Flood Insurance Does and Does Not Cover
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house flooding from outside, sandbags
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Preparing for a Flood Using Sandbags
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