How Much Flood Insurance Do You Need? Requirements Explained

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Flood insurance is usually only required if you have a mortgage and live in a high-risk area, although it might be worth considering even if neither condition applies. Federal law states you will be covered for an amount equal to your property's rebuilding cost or to the maximum limit of coverage available to you. This flood insurance requirement applies to both federal and private policies. While you are only required to adhere to minimum coverage, you may want to consider getting more to protect your home and possessions.

Flood Insurance Requirements

The National Flood Insurance Act of 1968 requires all mortgages backed by Fannie Mae or Freddie Mac to have coverage if the property is located in an area with special flood hazards. Private lenders will, most likely, have similar requirements for mortgage holders in similar areas. In either case, having a policy provided by the National Flood Insurance Program (NFIP) or one from a private insurer will be enough.

You are required to have enough insurance to cover the cost of the development of your property or the maximum limit of coverage, whichever is lower.

Type of home ownership

Flood Insurance RequiredRecommended Amount of Flood Insurance

Mortgage

Equal to property development cost or coverage limit.Equal the value of your home and possessions

No mortgage or rental

None.Equal the value of your home and possessions

The cost of development includes rebuilding your home if it is destroyed in the event of a flood. The insurance company's underwriter will determine this figure based on factors such as the cost of materials and labor in your area. The replacement value might change every year, as the cost of goods and services fluctuates.

The maximum limit of coverage depends on whether you go choose to buy a federal or private flood insurance policy. Coverage from by the NFIP typically doesn't exceed $250,000. Private flood insurers tend to provide much higher limits. For example, the Homeowners Choice Property & Casualty Company provides coverage up to $500,000 to homeowners in South Carolina.

How Much Flood Insurance Do You Need?

Homeowners and renters living in high-risk flood areas should consider how much insurance they need—not just the required amount. Homeowners and renters insurance policies will not pay out for any damages that resulted from a flood. Therefore, if you think your dwelling or personal possessions are covered by either of those, you should think again.

You always want your flood insurance coverage to equal the value of your home and possessions. The value of these should be determined based on their worth at the time you buy your policy. For example, if you bought a $2,000 built-in refrigerator in 2005, estimate its value based on what that is worth today.

We compiled a list of the median home value in each state to show how house structure values may vary. Keep in mind this doesn't include possessions. We included total value of flood damages recorded in the state during Water Year 2014 (October 1, 2013 – September 30, 2014). If your state tends to be prone to a lot of flood damage costs, consider getting enough flood insurance to cover your home and possessions.

StateMedian House Value2014 Total Flood Damages
Michigan$122,400$1,807,634,000
Texas$136,000$214,935,300
Florida$159,000$195,360,830
Illinois$173,800$140,693,000
Ohio$129,900$71,149,000
New York$283,400$68,457,499
Tennessee$142,100$52,225,000
Iowa$129,200$46,219,800
Minnesota$186,200$42,660,500
Alabama$125,500$34,613,460
Arkansas$111,400$29,883,000
Idaho$162,900$17,777,500
Arizona$167,500$13,468,000
Indiana$124,200$11,760,850
Nevada$173,700$11,632,500
Pennsylvania$166,000$10,988,000
North Dakota$153,800$10,833,000
New Jersey$315,900$8,850,250
South Dakota$140,500$7,966,000
Mississippi$103,100$6,311,000
Kentucky$123,200$5,716,100
Utah$215,900$5,375,000
Maryland$286,900$5,335,000
Washington$259,500$4,291,000
New Mexico$160,300$4,207,100
California$385,500$3,144,300
Vermont$217,500$3,065,000
New Hampshire$237,300$3,061,000
North Carolina$154,900$2,829,000
West Virginia$103,800$2,483,000
South Carolina$139,900$2,346,500
Maine$173,800$1,994,000
Nebraska$133,200$1,906,000
Montana$193,500$1,855,500
Colorado$247,800$1,773,000
Louisiana$144,100$1,733,000
Wyoming$194,800$1,280,000
Missouri$138,400$1,013,000
Massachusetts$333,100$1,003,000
Alaska$250,000$912,000
Virginia$245,000$555,500
Kansas$132,000$546,600
Oklahoma$117,900$537,000
Georgia$148,100$495,500
Wisconsin$165,800$464,000
Rhode Island$238,000$84,000
Oregon$237,300$0
Connecticut$270,500$0
Delaware$231,500$0
Hawaii$515,300$0

Many policies also have individual limits on possessions within a specific category. Instead of focusing on the lump sum of coverage, consider how much you will need to protect your individual possessions by categorizing them. For example, if you have a trading card collection worth $10,000, some flood insurance policies may not pay out enough to cover your loss. Private flood insurers may be better suited to insure for speciality items like these.

Here is how limits differ between a private and federal policy:

Coverage For…

Private Insurer LimitNFIP Limit
Building Structure$500,000$250,000
Fine Art$5,000Up to $2,500 for fine art, collectibles, furs, jewelry and business property combined
Collectibles$5,000
Furs$5,000
Jewelry & Silverware$5,000
Business Property$15,000
Golf Carts$5,000No coverage
Additional living expenses$7,500No coverage

The amount of coverage for living expenses is important if you live in an area with extreme flooding. Should your home become uninhabitable, your insurer may cover the cost of relocating and paying for a hotel stay until your house is rebuilt. Federal policies do not protect you from such expenses. Therefore, if this is something you want, you may need to seek out a private insurer.

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