US Flood Insurance Gap Widens as Federal Program Prices Out Millions

In eastern Kentucky, Libby Honeycutt listened from upstairs as floodwaters smashed through the lower floor of her home. Twenty-six miles south, Ronald Conley used a pontoon boat to rescue his dogs from his elevated house. Across a river, Jennifer Campbell heard a neighbor screaming for help.

All three recall how quickly the July 2022 flood moved, cutting cell service and leaving residents cut off from news of their loved ones. When the water receded, thousands faced damaged homes and disrupted lives — a burden made heavier because most of those affected, including the three, carried no flood insurance.

Across the United States, only 2.4% of properties are covered by the 4.5 million federal flood insurance policies, while 8.4% of properties face severe or extreme flood risk, an analysis shows. The shortfall reflects long-standing problems in a program that struggles to balance affordability, protection and taxpayer cost.

The number of policies has fallen by roughly 500,000 over five years, with rising prices a major cause. That decline comes as climate change intensifies hurricanes and heavy rainfall far from the coasts.

The gap is especially wide in eastern Kentucky, where some ZIP codes have no more than 5% of properties covered even though hundreds or thousands of buildings face extreme flood risk, according to federal figures and data provided by the risk analysis group First Street. Coastal areas, including parts of southern Louisiana, show similar patterns. High-risk, low-insurance areas tend to be poorer, and experts say FEMA's flood maps often fail to convey the true severity of the risk or to require enough coverage.

Efforts to overhaul the program, including options to make it 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, faculty director of the National Center for Disaster Preparedness at Columbia University.

Conley's double-wide trailer sits on stacked cement cinder blocks. During the 2022 flood, that elevation was not enough. Six inches of thick clay mud filled the home and had to be shovelled out. Without insurance, he mostly lived in a small FEMA-provided unit and depended on church groups and donations. He believes insurance would have sped up repairs. After that flood and another in 2025 that set back his work, he was able to move back in only this month.

Congress created the National Flood Insurance Program in 1968. It offers coverage in communities that agree to manage flood risk, such as by restricting construction in high-risk zones. 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 property and $100,000 for belongings. FEMA flood maps determine who is in a high-risk area where flood insurance must accompany a federally backed mortgage.

When the system works, it can be transformative. Bryant Matthews was awake with a toothache in Letcher, Kentucky, when he noticed water rising fast in 2022. He got his wife, stepchildren and mother to safety. Friends housed them in a basement for about three months, and they lost belongings including collections of old Metallica recordings and 1980s horror movies. But their flood insurance paid off what remained on their mortgage, helping them restart debt-free in nearby Hazard, closer to school and work. "I am very appreciative, very blessed," he said.

In many places, FEMA's maps understate severe flood risk, leading millions to believe their homes are safer than they are and leaving them without a requirement to buy coverage. That complicated rebuilding after more than a foot of rain fell on parts of Kentucky in 2022, killing more than 40 people. The worst came in the early hours of July 28, when heavy rain on already saturated ground rushed down steep hills into narrow valleys. Six hundred people needed helicopter rescues.

Where the flood struck, just 2.1% of properties were insured at the time, a rate that remains about the same today, even though about 47% face severe or extreme flood risk — a gap of 45 percentage points, more than seven times the national average. FEMA's maps captured only 18% of the buildings hit within a high-risk zone. The maps are often outdated and omit some risks, such as inland heavy-rain flooding.

The largest insurance gaps occur where heavy precipitation falls away from large water bodies, said Jeremy Porter, chief economist at First Street, part of finance company MSCI. "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 system performs better in some areas, such as the Charleston, South Carolina, region, where maps record hurricane risk, high-risk zones are widespread and buyers expect to discuss flood insurance. The area's affluent buyers can also better afford coverage.

High prices are a growing obstacle. The typical policy costs about $1,100 a year, up roughly 90% in five years. Dan Charlson of Lake Charles, Louisiana, said his premium rose over time from about $900 to $4,000, prompting him to drop it. "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 from efforts to modernize pricing. A few years ago, the federal government fully implemented Risk Rating 2.0, a more accurate way of aligning a property's flood risk with its premium. But more accurate pricing meant much higher costs for most buyers. A government watchdog found Gulf Coast states had been especially underpriced and required large increases.

Louisiana Senator Bill Cassidy, a Republican, said the rating system implemented by the Biden administration and defended by the Trump White House has put insurance out of reach for too many. "Recent administrations pushed Risk 2.0 forward without fixing the affordability problems created for Louisiana families," he said.

A May review commissioned by the Trump administration found fundamental flaws in the National Flood Insurance Program, run by FEMA, which is more than $20 billion in debt. Congress has told the NFIP to be affordable, financially sound, available to all and risk-informed — goals that often conflict, with political pressures frequently shaping the outcome.