Reading this article will take you just 7 minutes. You will be able to bust 15 common myths about flood insurance and uncover facts that could save your home, and your wallet. See flood insurance in a new light.

Myth #1

My homeowner’s insurance policy covers flooding.

Fact

The Federal Emergency Management Agency (FEMA) consistently emphasizes that flood coverage is typically not included in homeowners insurance policies. Moreover, flood damage is usually not covered by auto and renters insurance as well. Flood insurance is the only type of insurance that covers the cost of rebuilding a property after flood damage.

Myth #2

My only option for flood insurance is FEMA’s National Flood Insurance Program (NFIP).

Fact

There is a private marketplace that can offer more favorable options to property owners than the NFIP. The NFIP provides limited coverage. If you want comprehensive coverage, private insurers often offer more coverage options.

Myth #3

My mortgage company won’t accept flood insurance from a private insurer.

Fact

The Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12), a federal law, requires mortgage lenders to accept private flood insurance policies that meet certain criteria.

Myth #4

My home is not eligible for flood insurance because it is not in the high-risk area.

Fact

You can buy flood insurance regardless of your property’s flood risk. However, FEMA highlights that if your flood zone starts with A or V and you have a federally backed mortgage, lenders will require flood insurance.

Myth #5

I do not need a flood insurance because I am not in a high-risk flood zone.

Fact

It’s important to be prepared even if you are not located within a mapped floodplain. FEMA reports that 40% of flood insurance claims filed through the NFIP come from properties outside high-risk areas. Flood insurance for these properties is often more affordable, making it a wise investment.

Myth #6

I do not need flood insurance because it does provide much coverage.

Fact

Flood insurance can cover both your home and belongings in the event of flood-related damage. Both NFIP and private market insurance policies have their limitations, but you can still find coverage that protects your home to the extent you need.

The NFIP is available to any community that adopts and enforces floodplain management ordinances to reduce future flood risks. Flood insurance from the NFIP is only available if your community participates in the program.

With the NFIP, flood insurance coverage is capped at $250,000 for the building and $100,000 for personal contents, per residential property. Building coverage applies to one insured building per policy and includes the structure, its foundation, and permanently installed features and built-in appliances. In many cases, the program pays to rebuild your home up to the policy limit, but coverage will never exceed the $250,000 cap.

Your coverage amount should reflect your home’s rebuilding cost, not its market value. For personal belongings, the NFIP typically pays based on the item’s current value at the time of loss, not what it would cost to buy it new. Many private insurers, by contrast, offer coverage that reimburses you for the cost of replacing belongings with new items.

If your home’s rebuilding cost exceeds the NFIP’s $250,000 limit, you will need to cover the difference out of pocket or purchase additional coverage from a private insurer, commonly referred to as excess flood insurance coverage.

Myth #7

I do not need flood insurance because my community never flooded before.

Fact

Flooding can result from poor drainage, summer storms, melting snow, neighborhood construction, or broken water mains. According to the FEMA, 99% of counties in the U.S. experienced a flood in the past 20 years.

Myth #8

I do not need flood insurance because claims never get paid.

Fact

Flood insurers pay out claims for covered losses up to policy limits, but only legitimate damage is reimbursed. While summary statistics are not available for private flood insurance providers in the U.S., the NFIP paid 99.7% of the claims filed from 1980 to 2023.

“We haven't really seen many [private flood insurance] companies go out of business recently. The only time you're going to be in a compromised situation is if the company is a really bad underwriter, doesn't know how to qualify risk, and takes on way too much. What would happen is you’re going to have your claim paid, but they’re just going to drop you,"

Garrett Mitchell

President & Founder of Rocket Flood

Myth #9

If you buy private flood insurance, the company is going to go out of business and you’re never going to see your payout.

Fact

The majority of private flood insurance policies are issued through a managing general agent (MGA). An MGA is contracted by insurers and reinsurers to perform core functions such as underwriting, binding coverage, policy administration, claims handling, and distribution.

Most insurers and reinsurers working with MGAs are rated by AM Best, the leading global credit rating agency for the insurance industry. AM Best provides independent financial strength ratings and is recognized by regulators, including the U.S. Securities and Exchange Commission.

All of Rocket Flood’s carriers, Arkly’s partner, are A-rated by AM Best, meaning they meet stringent financial strength standards. The likelihood of an A-rated insurer becoming insolvent is low.

Importantly, MGAs themselves do not carry the insurance risk. They partner with well-capitalized insurers and reinsurers that provide the underlying capacity. These carriers typically maintain substantial reserves and financial backing, often exceeding that of many regional homeowners insurers in Florida.

As Garrett Mitchell, President & Founder of Rocket Flood, explains:

“We haven’t really seen many companies go out of business recently. The only time you’re going to be in a compromised situation is if the company is a really bad underwriter, doesn’t know how to qualify risk, and takes on way too much. What would happen is you’re going to have your claim paid, but they’re just going to drop you… The likelihood of a carrier going out of business is low because they’re not operating as insurance companies. They’re MGAs that have partnered with capacity providers and reinsurance companies that have much greater financial backing than your homeowners insurance company if you’re located in the state of Florida,” said Garrett Mitchell, President & Founder of Rocket Flood, in his interview with HighTide.

Myth #10

I can’t afford flood insurance. It’s too expensive.

Fact

If your property is located in a low-to-moderate flood risk zone (FEMA’s X zones), flood insurance will typically be relatively affordable.

Without flood insurance, the cost to repair after the damage can be high. According to FEMA, just one inch of floodwater can result in damages costing as much as $25,000.

Myth #11

I cannot buy flood insurance during a declared state of emergency.

Fact

Flood insurance policies through the NFIP can still be purchased during a state of emergency but will typically have a 30-day waiting period. Private flood insurance policies may still be available during emergencies, but insurers might not cover active flood events.

Myth #12

I do not need flood insurance because federal disaster assistance will pay for all my losses from flooding anyway.

Fact

Federal disaster relief becomes available only when the President declares a federal disaster. Even though your area might be affected by a flood due to that disaster, it is not guaranteed that your area will receive a Presidential Disaster Declaration. The occurrence of a natural disaster does not guarantee a Presidential declaration. As the Florida Division of Emergency Management points out, federal disaster assistance usually comes in the form of a loan that must be repaid with interest. The average amount distributed is around $5,000. Therefore, federal disaster assistance is not a reliable substitute for flood insurance.

Myth #13

I cannot buy flood insurance because my property flooded before.

Fact

Flood insurance is still available to homeowners whose properties have a history of flooding, but options may become more limited as the number of claims for that property increases.

“A couple of scenarios that are not eligible for private flood but are going to be eligible for NFIP, in which NFIP is the only option, are a home built over water, homes with certain loss history, and homes with one or two claims. I would say a property with two claims is not going to be eligible with private companies, but it will still be eligible with the NFIP. Once you get three losses, it goes into a repetitive loss program, and it’s not even eligible in NFIP’s main program. You lose all subsidies at that point as well, “ – clarified Mitchell.

Myth #14

I am not a homeowner, so I do not need a flood insurance.

Fact

As a tenant, you can purchase a flood insurance policy to replace your personal belongings in case of flood damage.

Myth #15

If I start cleaning up before the inspector arrives, my flood claim will be denied.

Fact

FEMA and insurance companies expect flood insurance policyholders to start the recovery process by documenting damage and taking steps to prevent/stop the spread of mold. If a homeowner lets mold spread because they were “waiting for the inspector,” the insurance company may refuse to pay for that additional damage. Therefore, document your property and belongings before, during, and after a flood, and keep all receipts for repairs to preserve claim eligibility.

Still have questions? We debunk the 10 most common flood myths. Read on.