Flood insurance is a financial instrument that protects real property owners from water damage to the structure and contents of their property. While flood insurance can be purchased through many different insurance companies, all policies are federally regulated so the same policy costs the same amount no matter which company it is purchased through.
To understand what flood insurance covers, you need to know three things first:
1. Standard homeowners insurance doesn’t cover flood damage at all. It’ll cover some damage from rain, but if your home is filled with water as a result of rising bodies of lakes, rivers, streams, and oceans, it won’t cover you.
2. The most common flood insurance is offered through the federally regulated program known as the National Flood Insurance Program (NFIP). It has two policies:
You can buy one or both.
Related: What happens if you need more than $250,000 worth of coverage? You need to get excess flood insurance, which is only offered by private companies, not the Feds.
3. You might have to buy it. If you’re taking out a mortgage on a property that’s in a high-risk zone (also called a Special Hazard Flood Area), your lender will require you to buy a policy in order to get the loan. If you just want to buy policy, you have to make sure your community participates in the national flood program. Flooding affects every state, so you’re probably eligible.