Growing Vulnerability of Inland Areas to Flooding Yet Homeowners Don’t Have Flood Insurance Coverage or Believe It’s Necessary: Triple-I

New Report Examines Flood Insurance Gap in U.S.

Inland areas are increasingly vulnerable to flooding from both tropical storms and severe convective storms, yet the number of homeowners who purchase flood insurance is dismal, reflecting consumer misunderstandings about the coverage, according to the Insurance Information Institute’s (Triple-I) updated Issues Brief.

Flood: State of the Risk examines the flood insurance gap throughout the U.S., and what can be done to remedy the problem. Floods can happen anywhere — just one inch of floodwater can cause up to $25,000 in damage. Most homeowners’ insurance does not cover flood damage. Flood insurance is a separate policy that can cover both buildings and contents.

The devastation wrought by Hurricane Helene across a 500-mile swath of the U.S. Southeast and southern Appalachia, including Florida, Georgia, the Carolinas, Virginia and Tennessee, highlights the scale of the flood-protection gap in non-coastal areas. Helene dumped 40 trillion gallons of water across these states in September 2024, causing hundreds of deaths and billions in insured losses.  Much of the loss was concentrated in western North Carolina, with parts of Buncombe County – home to Asheville and its historic arts district – left unrecognizable. Less than 1% of residents in Buncombe County had federal flood insurance when Helene struck, the Brief noted.

In July 2023, a series of intense thunderstorms resulted in heavy rainfall, deadly flash floods, and severe river flooding in eastern Kentucky and central Appalachia. Flooding led to 39 fatalities and federal disaster-area declarations for 13 eastern Kentucky counties. According to the Federal Emergency Management Agency (FEMA), only a few dozen federal flood insurance policies were in effect in the affected areas before the storm.

“Though approximately 90% of all U.S. natural disasters involve flooding, many homeowners still are unaware that a standard homeowners policy doesn’t cover flood damage,” said Dale Porfilio, FCAS, MAAA, chief insurance officer, Triple-I. “Similarly, many believe flood coverage is unnecessary unless their mortgage lenders require it and will drop the flood insurance coverage once their mortgage is paid off to save money.”

More than half of all homeowners with flood insurance are covered by NFIP, which is part of FEMA and was created in 1968 – a time when few private insurers were willing to write flood coverage.

In recent years, insurers have grown more comfortable taking on flood risk, thanks in large part to improved data and analytics capabilities. The private flood market has changed since 2016, when only 12.6% of coverage was written by 16 insurers. In 2019, federal regulators allowed mortgage lenders to accept private flood insurance if the policies abided by regulatory definitions. The already-growing private appetite for flood risk gained steam after that.

“Private insurers are accounting for a bigger piece of a growing flood risk pie,” said Porfilio. “This increased interest in flood among private insurers offers hope for improved affordability of coverage at a time when NFIP’s Risk Rating 2.0 reforms have more accurately aligned pricing with flood risk,” he said.

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