Flood Insurance: The Gap That Could Ruin You (2025)
I keep coming back to Lisa’s flooded basement because it makes me so angry. Two feet of water. $15,000 in damage probably. She’d been paying for homeowners policy insurance faithfully for seven years thinking she was protected.
She wasn’t.
“But it’s water damage,” she kept saying on the phone. “Water damage is covered. It literally says so in my policy.”
Yeah some water damage is covered. A burst pipe is covered. Washing machine overflow is covered. But flooding? Water from OUTSIDE your home? Rising water from storms or rivers or overwhelmed drainage? Not covered. Ever. By any standard homeowners policy anywhere.
This is maybe the single biggest gap in home insurance and almost nobody knows about it until they’re standing in floodwater watching their stuff float by.
Why flooding isn’t covered
The insurance industry decided decades ago that flood risk is too concentrated and catastrophic to cover profitably. When floods happen they hit entire neighborhoods at once. Everyone files claims simultaneously. It’s not like car accidents where claims are random and spread out.
So insurance companies just… don’t cover it. The federal government created the National Flood Insurance Program (NFIP) in 1968 because private insurers refused. That program is still the main source of flood insurance today.
Point is: your homeowners insurance will never cover flood damage. Doesn’t matter if you have cheap insurance or expensive insurance. Doesn’t matter if you’ve been a customer for 30 years. It’s excluded. Period.
Covered water damage vs flooding (this is where they get you)
COVERED by homeowners: Burst pipes inside your home. Overflowing toilet or bathtub. Washing machine leak. Water heater rupture. Accidental discharge from plumbing. Ice dams forcing water into roof.
Basically water damage from INSIDE your home from sudden accidental events.
NOT COVERED (need flood insurance): Rising water from storms. Overflowing rivers. Storm surge. Heavy rain overwhelming drainage and entering through foundation. Mudflow. Any water entering from OUTSIDE by rising or flowing.
Lisa’s basement flooded because heavy rain overwhelmed neighborhood drainage and came through foundation. That’s flooding. Not covered.
If a pipe burst in her basement causing same damage? Covered. But water from outside? Nope.
You probably need it even if you don’t think you do
People assume flood insurance is only for flood zones near rivers and coasts. And yeah if you’re in a high-risk zone you definitely need it.
But here’s the thing. According to FEMA data over 40% of NFIP flood claims come from OUTSIDE high-risk zones. More than four in ten. Floods happen everywhere. Heavy rainstorm plus overwhelmed drainage equals flooded basement. Neighbor’s property grading directing water toward your house. Storm drain backing up.
I live in Portland. Not a flood zone. But I’ve seen basements flood in neighborhoods that “never flood.” Climate change is making rainfall more intense and less predictable. Places that never flooded are flooding now.
And if you’re NOT in a high-risk zone? Flood insurance is actually pretty cheap. Like $300-500 a year in many cases.
What flood insurance covers
NFIP has two parts. Building coverage—the structure, foundation, electrical, plumbing, HVAC, built-in appliances. Max $250,000 residential. Contents coverage—your stuff inside. Max $100,000. These are separate, you have to buy both if you want both.
Important: basements have limited coverage. NFIP covers furnaces and water heaters in basements but not finished basement improvements. No drywall, flooring, or furniture stored down there. So Lisa’s claim would’ve still been limited even with flood insurance.
Also there’s a 30-day waiting period. Can’t buy flood insurance when a storm is approaching.
The disaster declaration thing people get wrong
People assume if there’s a federal disaster declaration the government pays for their damage. Wrong.
Federal disaster assistance is usually a loan. You pay it back. Average FEMA disaster loan is around $30,000 and you pay it back with interest over years. Flood insurance is money you don’t pay back.
Plus disaster declarations only happen for major events. Basement floods during normal rainstorm? No disaster declaration. No federal help. You’re on your own unless you have flood insurance.
What to do
Check if you have flood insurance. If not, get a quote. In high-risk zones it’s more expensive but you need it. In lower-risk zones it’s probably $300-500 a year which is nothing compared to the alternative.
You can buy through any insurance agent that participates in NFIP or through private flood insurers like Neptune or Palomar. Private might have higher limits and better basement coverage.
Collision just knocked my coffee over which feels appropriate somehow. But seriously—flood insurance exists. It’s separate from homeowners. You probably need it more than you think. Don’t be Lisa.
