Flood Insurance: Are You Covered?

July 11, 2019

Inland Marine


Hurricane season is here — and with other major recent storms impacting wide swaths of the country — there is no better time to assess your flood insurance coverage. Everyone should review their existing policies on a regular basis and check what coverage they have for a residential flood. Business owners should also make sure they are protected with commercial flood insurance. It’s crucial for agents and brokers to ensure they specifically advise clients with respect to flood insurance.

Why is this so important? Because flooding is the most common natural disaster in the United States, and it is extremely costly. It also doesn’t just affect properties in flood-prone locations such as coastlines or areas near lakes and rivers. According to the Federal Emergency Management Agency (FEMA), one quarter of all flood insurance claims are filed for properties outside high-risk flood zones.

Everyone needs flood insurance, no matter where you live or operate a business. This is true even if a mortgage lender does not require flood insurance as a condition of financing.

The true cost of flooding

Flooding is costly because water can be very destructive, even in small amounts. A flood of just one inch of water can do $25,000 in damage to a house. To demonstrate just how expensive a flood can be, FEMA has created this tool that calculates damage based on water level. The costs add up quickly as the water rises!

Even someone with the healthiest emergency fund would likely find it challenging to pay for a flood of a few inches. For many, it could be financially devastating. This is why flood insurance is so important.

Don’t count on federal disaster assistance

Many people also mistakenly believe that they do not need to have flood insurance for businesses or residential property because federal disaster relief will cover their costs. But that often isn’t the case.

For one thing, federal assistance only kicks in if the government declares a disaster — and, frequently, this does not happen. Relying on that declaration is pretty much like gambling with your financial stability. It’s just not a wise thing to do.

Even if the government does declare a disaster, the amount available for assistance is limited. Usually, FEMA disaster grants are only about $5,000 per household. As the above FEMA calculator shows, this would hardly begin to cover the damage from a minor flood, let alone one of a foot or two.

Companies affected by a flood could also receive a loan from the U.S. Small Business Administration, but those have to be repaid with interest. In other words, the owner will eventually pay out of pocket for the cost of all damages. The loan only delays that.

The only way to ensure you are protected is to have your own flood insurance.

What insurance agents should know about flood coverage

Insurance agents are on the front lines when it comes to educating their individual and business clients about the risks of flooding. Because flood coverage is not standard in all policies, agents must ensure clients understand how disruptive and financially devastating a flood can be.

The FEMA calculator shared above is a great tool for explaining the importance of flood insurance. You can also go over the FEMA flood map with a client to point out particular areas of risk — though you should still emphasize that flood insurance is crucial for anyone, not just someone with a house or business in a high-risk flood zone.

We also recommend reviewing the National Flood Insurance Program website on a regular basis and signing up for their email updates on regulatory changes. They also offer courses and workshops. Doing all of this will allow you to be the best advocate you can for your clients, and ensure the advice you give is relevant and current.

Flood insurance is smart coverage

There is no getting around the fact that flooding can be financially devastating. Homeowners could be on the hook for tens of thousands of dollars for even a minor flood. Flood insurance for businesses should be part of any sound risk management plan. It’s simply the responsible thing to do. So, call your agent today and review your coverage.

And, if you’re an insurance agent or broker, consider reaching out to your clients on an annual basis to go over the risks and any changes they should make to their policies.


We recommend working with a trusted agent or broker to help find the correct coverage and the best rates for your unique needs.