Flood Risks: Understanding the Risk of Not Being Insured

Nobody ever thinks it's going to be their house. You always hope for the best and prepare for the worst, which makes flood insurance a non-question. It's imperative to have it to protect your property.

Help your client understand their risk.

Even if flood insurance is not mandated for your client’s property, they are still at risk. In fact, one in four insurance claims come from outside high-risk flood areas.

To learn more about their flood risk, your clients can:

  • review their community flood map on FEMA’s Map Service Center, or
  • check with their local community planning or building permit department.

Also, lenders are required to notify borrowers if they must purchase flood insurance as a condition of a mortgage loan.

Risk Rating 2.0: Equity in Action allows FEMA to equitably distribute premiums across all policyholders based on the replacement cost value of their home and the unique flood risk of their property. To achieve equity, FEMA now has the capability and tools to address rating disparities by incorporating more flood risk variables. These include flood frequency, multiple flood types — river overflow, storm surge, coastal erosion, and heavy rainfall — and distance to a water source, as well as property characteristics such as elevation and the cost to rebuild. 

SFHA vs NSFHA: Understanding flood risk.

It is important to let your client know that low-risk doesn’t mean no risk, and that most homeowners insurance policies typically do not cover flood damage.

  • Known as high-risk flood areas, these are the areas with the highest risk for floods. These zones begin with the letters A or V on FEMA flood maps.

    If a property is in an SFHA or designated high-risk flood area, then federally regulated or insured lenders must require the buyer to purchase flood insurance as a condition of their mortgage loan.

  • Known as moderate- to low-risk flood areas, these areas are designated with the letters B, C, and X on FEMA flood maps.

    In these areas, the risk of being flooded is reduced, but not completely removed. One in four insurance claims come from outside high-risk flood areas.

    Property owners in moderate- to low-risk as (NSFHAs) are eligible for lower-cost Preferred Risk Policies (PRPs).

    One other NSFHA flood zone is Zone D. These are areas of undetermined flood hazards where there is likely additional flood risk, but the extent is unknown..

Flood Risk Marketing Resources

Visit the NFIP Resource Library for brochures, social media posts, and other marketing materials to help your clients understand their flood risk.

Visit Resource Library

Federal disaster assistance is not the only answer.

Federal disaster assistance is available only if the President declares a disaster. With flood insurance, your client is covered even if a disaster is not declared.

Disaster assistance typically comes in two forms:

  • A U.S. Small Business Administration loan, which must be paid back with interest, or
  • A FEMA disaster grant, which is about $5,000 on average per household.

Both programs have strict eligibility requirements based on individual need and many disaster survivors may not qualify.

By comparison, the average flood insurance claim payment over the past 5 years was about $69,000. Your client will never have to repay money received from a verified claim on their National Flood Insurance Program (NFIP) flood insurance policy.