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Flood Insurance

Flood Insurance

Flood insurance provides financial support to the policyholder in the event of property loss due to flooding. The cost associated with this type of policy often depends on the location. To determine which areas are likely to experience heavy flooding, insurance companies use topographical maps. These maps show areas that are floodways and lowlands. That helps to see if a location is in an area prone to floods.

Who Does Flood Insurance Cover?

Many homeowners do not realize they need flood insurance. They assume flood damage is included in a traditional home insurance policy. The truth is that flood insurance is separate.
In the U.S., about 20% of people who own homes at risk for flood damage have insurance for floods. The low number is probably because the homeowners don’t realize they need separate coverage for floods.

A traditional home insurance policy relies on the economic principle of large numbers to charge policyholders small amounts of money. The money is for paying claims of the group of policyholders who suffer damage or loss. The number of people making claims in generally small compared to some other types of insurance. However, with flood insurance, the number of people making claims outnumbers the number of people who want flood protection.

In most cases, insurance companies don’t project making a significant profit by providing flood damage coverage. If that’s the case, then the homeowner has to look elsewhere for flood insurance.

In parts of the U.S. that are prone to floods, the federal government requires insurance that protects against flood damage. This requirement is for the security of FHA and VA mortgage loans.


People with a home mortgage should buy a separate flood insurance policy. A private primary flood insurance company can help, but the company must also be a National Flood Insurance Program distributor.