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🌊 '''Flood insurance''' provides coverage for property damage and, in some forms, contents loss caused by flooding — a peril that is almost universally [[Definition:Exclusion | excluded]] from standard [[Definition:Homeowners insurance | homeowners]], [[Definition:Renters insurance | renters]], and [[Definition:Commercial property insurance | commercial property]] policies. In the United States, the primary source of flood coverage for residential and small commercial properties has historically been the [[Definition:National Flood Insurance Program (NFIP) | National Flood Insurance Program (NFIP)]], a federal program administered by [[Definition:Federal Emergency Management Agency (FEMA) | FEMA]]. A growing [[Definition:Private flood insurance | private flood insurance]] market now competes alongside the NFIP, offering higher limits, broader terms, and more granular pricing powered by advanced [[Definition:Catastrophe modeling | catastrophe modeling]].

🗺️ Flood policies under the NFIP are sold through a network of [[Definition:Write-your-own program (WYO) | Write Your Own (WYO)]] carriers that handle policy servicing and [[Definition:Claims handling | claims handling]] while the federal government retains the [[Definition:Underwriting risk | underwriting risk]]. FEMA's flood maps delineate [[Definition:Special Flood Hazard Area (SFHA) | Special Flood Hazard Areas]], and properties within these zones that carry a federally backed mortgage are required to purchase flood insurance. The NFIP's rating methodology has undergone a significant overhaul through Risk Rating 2.0, which replaced the legacy zone-based approach with property-specific pricing that accounts for flood frequency, flood source, distance to water, and [[Definition:Replacement cost | replacement cost]]. Private carriers, meanwhile, use proprietary [[Definition:Flood model | flood models]] to identify profitably insurable risks — often properties that the NFIP overcharges relative to their true exposure — and can offer coverage with fewer coverage gaps, such as including basement contents or [[Definition:Additional living expense (ALE) | additional living expenses]].

⚡ Flood insurance sits at the intersection of public policy, [[Definition:Climate risk | climate risk]], and [[Definition:Insurance market | market]] innovation. The NFIP has accumulated tens of billions in debt following catastrophic seasons, raising questions about the program's long-term sustainability and the implicit taxpayer subsidy embedded in its rates. For the private market, the opportunity is enormous — only a fraction of at-risk properties carry flood coverage — but so is the [[Definition:Adverse selection | adverse selection]] risk of attracting policyholders in the most flood-prone areas. [[Definition:Insurtech | Insurtech]] firms are entering the space with [[Definition:Parametric insurance | parametric]] flood products that pay fixed amounts triggered by measured water levels, eliminating the traditional [[Definition:Adjuster | adjuster]]-driven process and accelerating payout speed for policyholders hit by a flood event.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:National Flood Insurance Program (NFIP)]]
* [[Definition:Catastrophe modeling]]
* [[Definition:Private flood insurance]]
* [[Definition:Parametric insurance]]
* [[Definition:Climate risk]]
* [[Definition:Special Flood Hazard Area (SFHA)]]
{{Div col end}}

Definition:Flood insurance - Revision history

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