Many homeowners underestimate their flood risk, leaving millions uninsured or underinsured in the face of a rising tide of flood events.
A 2025 study from the Federal Reserve Bank of Philadelphia (FRBP
) found 70% of annual flood losses remain uninsured, amounting to $17.1 billion in financial exposure each year.
A new report from Neptune Flood, “Bridging the Flood Insurance Gap: Addressing the Underinsurance Crisis in the United States,” found that the flood i
nsurance gap stems from a wide variety of factors, from consumer misconceptions to the limitations of the National Flood Insurance Program (NFIP).
Examples of uninsured and underinsure losses include:
During a 1-in-100-year flood event, the average uninsured household faces a coverage shortfall of over $100,000 to $136,000.
Of the estimated $24.4 billion in annual flood-related damage to single-family homes, only about 30% is insured.
77% of at-risk single-family homes outside FEMA high-risk flood zones have no flood insurance.
More than 90% of
low-income households are underinsured, with uninsured expected losses often exceeding 20% of annual income.
Severe repetitive loss properties comprise just 2.5% of all policies but have accounted for nearly 50% of the NFIP’s cla
ims by dollar value. These properties flood repeatedly and are often rebuilt using public funds, creating a costly cycle of repeated losses.
Increased Flood Risks
Watch More Image Part 2 >>>
Floods are the most common and destructive natural disaster in the United States, with 90% of all natural disasters involving flooding. Of the approximately 11
0-plus million buildings across the United States, at least 9 million properties fall within FEMA-designated Special
Flood Hazard Areas (SFHAs), zones with at least a 1% annual chance of flooding. Broader modeling efforts estimate that more than 23.5 million properties are at risk of flooding over the next 30 years.
High and Dry Delusion
St. Petersburg, Florida-based Neptune’s annual consumer survey found most homeowners underestimate their flood risk, with nearly 70% of non-policyholders citing a lack of perceived risk as their primary reason for abstaining. Many homeowners mistakenly assume that their standard homeowners insurance policy covers flood damage, only to discover their vulnerability after a flooding disaster.
However, roughly 40% of NFIP claims come from outside SFHAs, and even among homes with a positive flood risk, 85% remain underinsured and over half (52%) of total expected flood losses inside SFHAs are uninsured
NFIP Limitations
According to the FRBP’s research, the NFIP currently services approximately 4.7 million (down from 5.7 million in 2009) flood insurance policies nationwide. However, the number of contracts in force (representing the actual buildings covered) is approximately 3.7 million (down from 4.7 million), underscoring the difference between individual units (such as condominium policies) and actual total insured properties.