US Flood Insurance Covers Few Despite Rising Climate Risk

The National Flood Insurance Program, created by Congress in 1968, is struggling to reconcile affordable premiums, adequate flood protection and the cost to taxpayers, leaving millions of Americans exposed as climate change drives flood risk higher.

Nationwide, just 2.4% of properties are covered by the program's 4.5 million policies, while 8.4% of properties face severe or extreme flood risk. The program offers coverage in participating communities that agree to manage flood risk, such as by restricting construction in high-risk areas. Standard homeowners insurance does not cover floods. Policies are available to renters and businesses, but most are bought by homeowners, covering up to $250,000 for a property and $100,000 for belongings. Federal flood maps determine who is in a high-risk area where coverage must be attached to a federally backed mortgage.

The gap is especially stark in eastern Kentucky, where in some ZIP codes no more than 5% of properties are insured even though hundreds or thousands of buildings face extreme flood risk. During the catastrophic 2022 floods, when more than a foot of rain fell and killed more than 40 people, only 2.1% of properties in the affected area were insured, a rate that remains roughly the same today. About 47% of properties there are at severe or extreme risk, a 45-percentage-point gap that is more than seven times the national average. Federal maps captured only 18% of the buildings affected in that event within a high-risk zone.

Coastal areas, including parts of southern Louisiana, also stand out. High-risk areas with low insurance uptake tend to be poorer, experts said, as are places where federal maps fail to convey the severity of risk or mandate sufficient coverage. The largest insurance gaps occur where heavy precipitation floods areas away from large water bodies, said Jeremy Porter, chief economist at the risk analysis group First Street. "That's the Appalachian region, further inland, and then in the Midwest and Northeast in particular, extreme precipitation is the way climate change is manifesting itself," he said.

The typical policy now costs about $1,100 a year, up roughly 90% over five years. Lake Charles resident Dan Charlson said he dropped his coverage when the math stopped working: his premium rose from about $900 to $4,000, and he expected it to keep climbing. "I'm looking at what it costs to fix the house, and the fact that I only flooded once in 50 years. So, it's a risk analysis," he said.

Costs have risen mainly because of efforts to modernize pricing. The federal government introduced Risk Rating 2.0, a more accurate way of aligning a property's flood risk with the price of coverage. But more accurate pricing meant much higher premiums for most buyers. A government watchdog found Gulf Coast states had been the most underpriced and required the largest increases.

FEMA said stronger building codes, smarter zoning and competitive private insurance options are needed rather than shifting all flood risk and cost to the federal government. It said Risk Rating 2.0 gives policyholders a better sense of their true risk, but the agency cannot address affordability without action from Congress and cannot force private insurers into the market. FEMA is working on a better mapping system called Future of Flood Risk Data, though the timeline is unclear.

Proposals to overhaul the program, including options to make coverage more affordable for low-income buyers, have stalled. "Everybody agrees it's broken, but no one can agree how to fix it," said Jeffrey Schlegelmilch of the National Center for Disaster Preparedness at Columbia University.