How much does flood insurance cost and what does it cover?

In early February 2024, thousands of homes across southern California were battered by flood waters amid record-breaking rainfall. Most of that damage, however, wasn't covered by insurance.

That's because, while a standard homeowners policy covers a lot, it rarely covers flooding.  

According to CNN, only about 1% of the homes in the affected areas had flood insurance through the National Flood Insurance Program (NFIP). There are private carriers that work outside of the NFIP, but they make up less than 10% of flood coverage in California.

When does your insurance cover water damage? It depends on where the water came from.

CNBC Select dives into what your homeowners policy does and doesn't cover, when it's time to consider flood insurance and how much a policy will cost you.

Water damage that originates inside the home, like from a burst pipe, is typically covered by a standard homeowners policy. That's especially true if the damage is what insurers describe as "sudden and accidental" and not due to poor maintenance or a mishap during renovations.

Nationwide Insurance stands out for its customizable coverage, as well as its numerous discounts and easy-to-use website. A standard home insurance policy with Nationwide also includes help rebuilding if you have to meet updated building codes.

When the source is outside the house, it's a bit more complicated: Water that comes into your home from the top down, like a drip caused by rain, may be covered. But if that same rain causes a flood that fills your basement with two feet of water, you'd need flood insurance.

Some insurance companies will add flooding as a named peril in a rider to your existing homeowners policy.

NFIP defines flooding as an "excess of water on land that is normally dry, affecting two or more acres or two or more properties." NFIP-backed flood insurance policies offer two forms of coverage, which can be bought together or separately.

Building coverage

• The house, including the foundation and walls
• Electrical and plumbing systems
• Central air conditioning, furnace and water heater
• Refrigerator, oven and other attached appliances
• Carpeting
• Permanently installed paneling, bookcases and cabinetry
• Detached garages 

Contents coverage 

• Personal belongings, like clothing, furniture and electronics
• Portable and window air conditioners.
• Portable microwave ovens and dishwashers.
• Area rugs and carpets not included in building coverage
• Clothes washers and dryers.
• Food freezers and the food in them.
• Certain valuables, like artwork and furs (up to $2,500)

The average flood insurance policy costs about $888 a year, according to the Federal Emergency Management Agency (FEMA). That rate varies greatly by state, as seen in these two tables.

How much your premiums will cost depends on your property's location and flooding risk, the building materials and the number of floors, as well as the type of policy and deductible amount you select.

If you have a mortgage on a property in a FEMA-designated flood area, you may need to pay your annual flood insurance premiums upfront.

The National Flood Insurance Program underwrites 90% of flood policies in the U.S., but there are limitations to its policies. They cap dwelling coverage at $250,000 and personal property coverage at $100,000.  

In addition, NFIP-backed policies don't cover outside structures or belongings, like trees, decks, patios, fences, swimming pools or septic systems.

Basement coverage is also limited with NFIP policies: Basic structural elements and essential equipment (like furnaces and sump pumps) are covered but personal belongings and finished basement improvements are not.

Flood insurance also doesn't cover damage from a backed-up sewer or drain. You'd need water-backup coverage on your homeowner’s policy.

And if you have to relocate while damage from flooding is repaired, your living expenses are not covered by NFIP-backed insurance.

Backed by FEMA, the NFIP will insure any homeowner, even one whose property is in a floodplain. You can get a policy directly from the program or through one of the dozens of insurance companies that partner with it through the Write-Your-Own (WYO) Program.

These carriers sell policies under their own name, but they're still underwritten by the NFIP and must still adhere to the rates and coverage options set by FEMA.

There are also private insurance companies that offer flood policies without NFIP backing. Because they're not governed by the same regulations, they can offer more customization and set higher coverage limits. (They can also decline to cover a high-risk property.)

If you have a high-end home, Chubb offers flood insurance policies to homes with a fair market value of at least $1 million. You can get up to $15 million in home and contents coverage, as well as up to $5,000 to help flood-proof your home or move your belongings if a flood warning is issued.

Private flood insurance can also cover property and belongings that NFIP-backed policies don't.

In addition to up to $4 million in building coverage and $500,000 in personal property coverage, Neptune Flood Insurance provides up to $50,000 to repair or replace external structures, up to $10,000 to replace items stored in your basement and as much as $10,000 for pool cleanup and repair.

Unlike NFIP insurance, a basic flood policy with Neptune pays for your living expenses if you need to move during repairs.

If you have a mortgage on a home in a FEMA-designated flood area, your lender may require you to take out flood insurance. Usually, the policy only needs to cover the building, though you can add property coverage, too.

Even if your lender doesn't mandate it, though, flood insurance could be a wise investment. Ninety percent of natural disasters in the U.S. involve flooding, according to NFIP data, and more than 40% of claims come from areas that aren't designated high-risk flood zones.

Flood damage is usually excluded from standard homeowners insurance policies. To start rebuilding your home in the wake of a deluge, you'll need flood insurance, either from the NFIP or from a private insurer.  

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every insurance review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of insurance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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