New Report Finds 77% of At-Risk Homes Outside FEMA Zones Have No Flood Insurance

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 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 insurance 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 claims by dollar value. These properties flood repeatedly and are often rebuilt using public funds, creating a costly cycle of repeated losses.

Increased Flood Risks

Floods are the most common and destructive natural disaster in the United States, with 90% of all natural disasters involving flooding. Of the roughly 110-plus million buildings across the United States, at least 9 million properties fall within FEMA-designated Special Flood Hazard Areas, 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.

NFIP premiums have been rising in recent years, particularly with the introduction of Risk Rating 2.0, which aims to align premiums more closely with actual risk. Florida policyholders, for example, have seen an average premium increase of 50%.

Even for homeowners seeking comprehensive coverage, the NFIP may not provide enough coverage for high-value homes. According to the Federal Reserve study, 23% of underinsured homes already carry the maximum allowable NFIP coverage, yet still face substantial out-of-pocket costs after a disaster.

However, lender reluctance and lack of familiarity with private flood insurance can discourage homeowners from transitioning away from NFIP policies, even with private options that offer better terms.

The Role of the Private Market in Addressing Underinsurance

The passage of the Biggert-Waters Flood Insurance Reform Act and subsequent legislative updates have required lenders to accept private flood insurance instead of NFIP policies, clearing a path for broader market participation.

Unlike NFIP policies, which have a maximum dwelling coverage limit of $250,000, private insurers can offer higher limits that align more closely with actual rebuilding costs and individual property needs.

With 95% of NFIP policyholders meeting private market underwriting standards and up to 60% eligible for lower premiums, the private market has the tools, technology and flexibility to close this gap, offering higher limits, broader coverages and faster service.