Landlord vs. Flood Insurance​

Last published: March 26, 2025

Floods are the most common and costly natural disaster in the U.S., causing over $155 billion in property damage in the last decade alone. Yet **most landlord insurance policies don’t cover flood damage**—leaving property owners vulnerable to massive financial losses. If you own rental properties in high-risk areas, understanding the gap between landlord insurance and flood insurance is crucial.

We’ve seen firsthand how devastating floods can be, especially since 43 million U.S. homes are at risk. The dwelling coverage of standard landlord insurance policies protect against fire and other damages but often exclude water damage from storms or overflowing rivers. Water damage and subsequent mold damage is one of the costliest types of damage to repair, often requiring full gut renovation.

With rising sea levels and unpredictable weather, relying on landlord insurance alone could be a costly mistake. Approximately 15% of homes in the United States are covered by flood insurance. This figure reflects a mix of policies from the National Flood Insurance Program (NFIP) and private insurers, though participation remains low despite flooding being a widespread and growing risk. With over 125 million households nationwide, this leaves a significant number unprotected against flood damage.

Let’s break down landlord insurance and flood insurance and explain the ways each insurance policy type protects your rental properties.

What is Landlord Insurance?

Landlord insurance protects rental property owners from financial losses related to their properties. It covers damages to the structure, liability claims, and lost rental income, but excludes flood and natural disaster-related damages.

Dwelling Coverage

Dwelling coverage pays for repairs or rebuilding the rental property after sudden and accidental damage, such as a fallen tree or fire. The coverage amount must match or exceed the property's loan value, but full replacement cost value without coinsurance is ideal. Coinsurance penalizes underinsured properties by reducing claim payouts if coverage falls below a set percentage of the property's value.

Liability Coverage

Liability coverage protects landlords from legal and medical expenses if a tenant or visitor gets injured on the property. It also covers property damage caused by negligence, like a broken staircase leading to a fall.

Loss of Rent Coverage

Loss of rent coverage reimburses landlords for missed rental income when the property becomes uninhabitable due to covered damages, like fire or severe storms. Flood-related loss of rent isn't included unless a separate flood insurance policy is in place.

Is Landlord Insurance required?

Landlord insurance isn't legally required in most states, but mortgage lenders often mandate it for rental properties. Standard landlord policies cover structural damage, liability claims, and lost rental income, but they exclude flood-related losses.

When Landlord Insurance Becomes Mandatory

• Mortgage requirements: Lenders typically require landlord insurance if the property has a mortgage.
• Lease agreements: Some lease contracts stipulate that landlords maintain insurance for tenant protection.
• Local regulations: Certain municipalities enforce insurance rules for rental properties.

Key Coverage Gaps in Landlord Insurance

• Flood damage: Standard policies exclude floods, requiring separate flood insurance.
• Natural disasters: Earthquakes, hurricanes, and other disasters often need additional riders/endorsements.
• Tenant-caused damage: Some policies limit coverage for intentional or negligent tenant actions.

Landlords in Special Flood Hazard Areas (SFHAs) must purchase flood insurance if their mortgage is federally backed. Even outside SFHAs, adding flood coverage reduces financial risk from unexpected water damage.

What is Flood Insurance?

Flood insurance provides financial protection against property damage caused by flooding. Standard landlord insurance policies exclude flood-related losses, making separate coverage essential for landlords in flood-prone areas.

Key Features of Flood Insurance

• Structural coverage: Protects the building's foundation, electrical systems, plumbing, and appliances.
• Contents coverage: Covers personal property like furniture and electronics, though tenant belongings require separate renters insurance.
• Exclusions: Typically excludes damage from sewer backups unless directly caused by flooding.

How Flood Insurance Differs from Landlord Insurance

• Coverage scope: Landlord insurance covers property damage (i.e. fire), theft, liability and loss of rental income but excludes floods.
• Risk-based pricing: Flood insurance premiums depend on the property's location within FEMA flood zones.
• Policy source: Available through the National Flood Insurance Program (NFIP) or private insurers.

Cost and Necessity

• Average claims: FEMA reports just 1 inch of water can cause over $25,000 in damage.
• High-risk areas: 80% of flood claims come from properties inside designated flood zones.
• Mandatory requirements: Federally backed mortgages and DSCR loans in Special Flood Hazard Areas (SFHAs) require flood insurance.

Flood insurance mitigates financial risks that standard landlord policies don't address, especially with rising climate-related flood threats.

Is Flood Insurance required?

Flood insurance becomes mandatory under specific conditions. Properties located in Special Flood Hazard Areas (SFHAs) require flood coverage if they have a mortgage from a federally regulated or insured lender. FEMA designates these high-risk zones, and non-compliance risks financial penalties or loan denial. All DSCR loan programs available from OfferMarket require flood insurance for properties in SFHAs.

When Flood Insurance Is Mandatory

• Federally backed mortgages: Lenders enforce flood insurance for properties in SFHAs, with coverage limits of $250,000 to $500,000 depending on building type.
• Commercial properties: Landlords with commercial buildings in flood zones must carry flood insurance, though lease terms may shift costs to tenants.
• Local regulations: Some municipalities impose additional requirements beyond federal mandates.

When It’s Optional but Recommended

• Properties outside SFHAs: 20% of flood claims originate in low-to-moderate risk areas, making voluntary coverage a prudent safeguard.
• Climate vulnerability: Rising flood risks due to extreme weather may outpace FEMA’s current flood maps.
• Financial exposure: Standard landlord policies exclude flood damage, leaving owners responsible for repairs averaging $25,000 per inch of water.

It's important to verify a property’s flood zone status using FEMA’s Flood Map Service Center to assess coverage needs. Even without a legal requirement, the potential for uninsured losses justifies the investment.

Flood Insurance Coverage Limits

Flood insurance coverage limits in the United States depend on whether you purchase a policy through the National Flood Insurance Program (NFIP) or a private insurer. Here’s a breakdown:

NFIP policies:

• Residential (1-4 unit): Up to $250,000 for building coverage and $100,000 for contents coverage.
• Residential (5+ family units): Up to $500,000 for building coverage and $100,000 for contents coverage.
• Businesses: Up to $500,000 for building coverage and $500,000 for contents coverage.
• Renters: Contents-only coverage is available up to $100,000.

NFIP policies also have specific limitations, such as restricted coverage for basements (i.e. only certain appliances and utilities are covered, not finished walls or personal items) and no coverage for additional living expenses or property outside the building (like decks or landscaping).

Private flood insurance policies:

Private flood insurance policies often have higher limits though cost and availability in your local market may be an issue.

• Building and Contents: Some private insurers provide coverage up to $1 million or more for both building and contents, depending on the policy and provider.
• Additional Options: Private policies may include coverage for living expenses, basement contents, or other exclusions under NFIP, with limits varying by insurer.

The exact limits depend on your policy type, property, and insurer. NFIP is standardized, while private insurance varies, so reviewing specific terms with an insurance agent that specializes in flood insurance is key.

What does Flood Insurance cover?

Flood insurance provides financial protection against structural and content damage caused by flooding. Unlike standard landlord insurance, it covers specific components of rental properties and personal belongings.

Building Property Coverage

Flood insurance protects the physical structure of a rental property, including:

• Electrical and plumbing systems
• Furnaces, water heaters, and built-in appliances
• Permanently installed carpeting, cabinets, and paneling
• Foundation walls, anchorage systems, and staircases
• Detached garages, fuel tanks, and solar energy equipment

Coverage applies to direct physical losses from flooding, but policies typically reimburse actual cash value rather than full replacement cost.

Personal Property (Contents) Coverage

A separate flood insurance policy covers tenant or landlord-owned belongings, including:

• Clothing, furniture, and electronics
• Washers, dryers, and portable air conditioners
• Curtains and window blinds
• Valuables like artwork and furs (up to $2,500)

Renters can secure up to $100,000 in contents coverage, while landlords must ensure tenants obtain their own policies for personal items.

What is a flood cert?

A flood cert (flood certification) is an official document that determines a property's flood risk based on FEMA's flood zone maps. It identifies whether a building is located in a Special Flood Hazard Area (SFHA), where flood insurance is mandatory for federally backed mortgages.

Key details in a flood cert:

• Flood zone designation: Confirms if the property is in a high-risk (e.g., Zone A or V) or low-to-moderate-risk area (e.g., Zone X).
• Base Flood Elevation (BFE): Specifies the expected water level during a 100-year flood event.
• Mandatory insurance requirement: States if the property must carry flood insurance under federal law.

Why it matters for landlords:

• Lenders require a flood cert before approving mortgages for rental properties in SFHAs.
• Even outside SFHAs, 20% of flood claims occur in low-risk zones, making flood certs valuable for risk assessment.
• FEMA’s maps may be outdated—private flood specialists can provide updated risk analyses.

How to get a flood cert:

• Order through FEMA’s Flood Map Service Center or a licensed flood insurance provider.
• Review the cert’s accuracy, especially if the property has flood history or nearby water sources.

Flood certs are often ordered by your lender as part of their appraisal order via an appraisal management company (AMC). Flood certs clarify insurance obligations and help landlords avoid uninsured losses from unexpected flooding.

How do I check to see if my property is in a Flood Zone?

Determining whether a rental property is in a flood zone requires checking FEMA’s flood maps or obtaining a flood certification. Both methods provide clarity on flood risk and insurance requirements.

FEMA Flood Map Service Center

FEMA’s Flood Map Service Center is the primary tool for verifying a property’s flood risk. Flood maps categorize areas into zones based on their likelihood of flooding.

• Zone A: High-risk area with a 1% annual chance of flooding. Flood insurance is mandatory if the mortgage is federally backed.
• Zone B, C, X: Moderate-to-low-risk areas. Flood insurance isn’t required but is recommended.
• Zone V: Coastal high-risk area with additional hazards like storm waves. Flood insurance is mandatory.

Flood Certification

A flood certification ("flood cert") is an official document that confirms a property’s flood zone status. Lenders typically require it during mortgage underwriting and order it via appraisal management company (AMC).

• Process: Ordered alongside the appraisal, it uses FEMA’s flood maps to determine risk.
• Purpose: Clarifies whether flood insurance is mandatory for compliance.

Appraisal Report

An appraisal report assesses a property’s value but may also include flood risk details.

• Inclusion: Some appraisers note proximity to flood zones and include a flood map in their report.
• Limitation: Doesn’t replace a flood certification for insurance verification.

Which Flood Zones require flood insurance?

FEMA designates Special Flood Hazard Areas (SFHAs) as high-risk zones where flood insurance is mandatory for properties with federally backed mortgages. These zones include:

• Zone A: Areas with a 1% annual chance of flooding and no detailed base flood elevations.
• Zone AE: Similar to Zone A but with base flood elevations determined.
• Zone AH: Areas with shallow flooding (1–3 feet) and a 1% annual chance of flooding.
• Zone AO: Areas with sheet flow flooding and a 1% annual chance of flooding.
• Zone V: Coastal areas with a 1% annual chance of flooding and additional hazards from storm waves.
• Zone X: Areas with a low to moderate risk of flooding. Specifically, it represents zones where the annual chance of flooding is between 0.2% and 1% (often referred to as the 500-year floodplain) or areas with a 1% annual chance of flooding (100-year floodplain) but with average flood depths of less than 1 foot, or areas protected by levees from the 1% annual chance flood. Flood Zones B and C are generally now grouped within Flood Zone X. Properties in moderate-to-low-risk zones (Zones B, C, or X) aren’t federally required to carry flood insurance, but lenders or local regulations may still mandate it. Over 20% of flood claims originate in these zones, making coverage advisable even outside SFHAs.

Whether you're a homeowner/borrower or lender, it's important to verify flood zone status using FEMA’s Flood Map Service Center or a flood certification, which lenders often require during mortgage underwriting.

How much does Flood Insurance cost?

Flood insurance costs vary based on multiple factors, ranging from hundreds to well over a thousand dollars annually. The price depends on location, property characteristics, and coverage limits.

Factors influencing flood insurance premiums

Location

Properties in high-risk flood zones (i.e. FEMA-designated Special Flood Hazard Areas) or near bodies of water have higher premiums due to increased flood probability. Elevation and past flooding history also impact pricing.

Property age

Newer homes typically cost less to insure than older ones, as insurers consider them less prone to flood damage.

Coverage amount

Higher coverage limits mean higher premiums, but they provide better financial protection. For example, a $300,000 policy costs more than a $50,000 one.

Average costs and recent trends

• Low-risk zones: $500–$1,000 per year
• High-risk zones: $1,000–$5,000+ per year

Note: Texas and Florida premiums have increased by considerably after FEMA adjustments, with further hikes expected.

Estimating your flood insurance cost

Use FEMA’s Flood Cost Tool to assess potential damage expenses. Just 1 inch of water can cause over $25,000 in repairs, making flood insurance a critical investment.

Check FEMA’s flood maps to determine your risk level, as 25% of floods occur outside high-risk areas. Properties in moderate-to-low-risk zones still account for 20% of flood claims.

For an exact quote, contact an NFIP-participating insurer or agent. Premiums are location-specific, with no standardized rates.

How much does Landlord Insurance cost?

Landlord insurance costs vary based on factors like property location, coverage limits, and deductible choices. The typical annual premium can range from $500 to over $2,000, but high-risk areas or properties with extensive coverage may exceed this range. As a rule of thumb, landlord insurance typically costs 0.4% to 1% of the market value of the home.

Key factors influencing landlord insurance costs

• Property location: Premiums increase in areas prone to natural disasters or high crime rates.
• Coverage limits: Higher dwelling or liability coverage raises costs.
• Deductible amount: Choosing a higher deductible lowers premiums but increases out-of-pocket costs during claims.
• Discounts: Bundling multiple properties, opting for automatic payments, or installing safety devices (e.g., smoke alarms) reduces premiums.

Ways to lower landlord insurance expenses

• Compare quotes from at least 3 insurers to identify competitive rates.
• Adjust deductibles upward if the property has a low risk of claims.
• Eliminate unnecessary add-ons (e.g., flood insurance in low-risk zones).

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Coverage gaps impacting costs

Standard landlord insurance excludes flood and earthquake damage, requiring separate policies. Tenants' personal property isn’t covered, so requiring renters insurance reduces liability risks and may lower premiums.

For precise pricing, I consult an insurance agent to tailor coverage to the property’s specific needs.

Landlord Insurance for DSCR loans

DSCR loans (Debt Service Coverage Ratio loans) require landlord insurance to protect the lender's investment in rental properties. Lenders assess the property's cash flow to determine loan eligibility, but they also mandate insurance coverage to mitigate risks.

Coverage Requirements for DSCR Loans

• Dwelling protection: Covers structural damage from fire, vandalism, or storms, excluding floods.
• Liability coverage: Shields against lawsuits from tenant injuries or property damage claims.
• Loss of rent: Compensates for lost rental income due to covered perils, not including flood-related disruptions.

Lender Guidelines: Landlord Insurance

Landlord Insurance is a bundle the following coverages:

• Dwelling
• Liability
• Loss of Rent

Working within lender guidelines and personal risk tolerances, landlord insurance policies are highly customizable to help balance coverage limits and associated policy premium.

Dwelling Coverage

Commonly referred to as "Property Insurance":

General Liability Coverage

Loss of Rent Coverage

Commonly referred to as "Business Interruption Insurance":

Lender Guidelines: Flood Insurance

Gaps in Insurance for properties financed with DSCR loan

Landlord insurance for DSCR loans follows standard exclusions:

• Flood damage requires a separate NFIP (National Flood Insurance Program) or private flood policy.
• Earthquake and sewer backup coverage need additional endorsements.

Cost Factors for DSCR Loan Insurance

Premiums depend on:

• Property location (high-risk zones increase costs).
• Coverage limits (higher limits raise premiums).
• Deductible choices (lower deductibles lead to higher annual payments).

Lender-Specific Conditions

Some lenders impose stricter requirements, such as:

• Flood insurance mandates for properties in SFHAs (Special Flood Hazard Areas).
• Higher liability limits (i.e. $1,000,000 per occurrence instead of $500,000).

Optimizing Insurance for DSCR Loans

• Compare quotes from at least 3 insurers to balance cost and coverage.
• Bundle landlord and flood insurance for discounts.
• Increase deductibles to lower premiums if cash reserves allow.

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DSCR loan approvals hinge on both financial metrics and adequate insurance. Standard landlord policies meet basic lender requirements, but flood insurance remains a critical add-on in flood-prone areas.

Flood Insurance for DSCR Loans

Protecting your rental property means going beyond basic landlord insurance especially when dealing with DSCR loans. While standard policies meet lender requirements they leave you exposed to flood risks that could devastate my investment.

You've learned that flood insurance isn’t just for high-risk zones—it’s a smart safeguard against unexpected water damage. Bundling it with my landlord policy can save money while ensuring full coverage.

With climate change increasing flood threats it important to manage your risk. Verifying your property’s flood risk and securing the right insurance gives you peace of mind knowing you're prepared for whatever comes your way.

Frequently Asked Questions

How much financial damage have floods caused in the U.S. recently?

Floods have caused over $155 billion in property damage in the U.S. over the past decade, highlighting the growing financial risks for property owners, especially in high-risk areas.

Does landlord insurance cover flood damage?

No, standard landlord insurance policies typically exclude flood damage. Property owners must purchase separate flood insurance to protect against water-related losses.

What does landlord insurance usually cover?

Landlord insurance generally includes dwelling coverage (structural damage), liability protection (legal claims), and loss of rent (due to covered perils). However, it does not cover flood or natural disaster-related damages.

Is landlord insurance legally required?

While not mandatory in most states, mortgage lenders often require landlord insurance for rental properties. Lease agreements or local regulations may also impose coverage requirements.

What are the key gaps in landlord insurance?

Major gaps include no coverage for flood damage, earthquakes, and other natural disasters. Additional riders or separate policies (like flood insurance) are needed for full protection.

Who must purchase flood insurance?

Properties in Special Flood Hazard Areas (SFHAs) with federally backed mortgages are legally required to have flood insurance. Some lenders may also mandate it for properties outside high-risk zones.

Why is flood insurance recommended even outside high-risk areas?

About 20% of flood claims come from low-to-moderate risk zones. Climate change increases flooding risks, making flood insurance a smart investment for all property owners.

Where can I check my property’s flood risk?

Use FEMA’s Flood Map Service Center to verify your flood zone status and assess whether flood insurance is necessary for your rental property.

How much damage can just 1 inch of floodwater cause?

Even 1 inch of floodwater can result in over $25,000 in property damage, underscoring the need for flood insurance regardless of location.

What does flood insurance cover?

Flood insurance includes structural coverage (building repairs) and contents coverage (personal property). It specifically addresses flood-related damage excluded by landlord policies.

Are rental properties with DSCR loans required to have flood insurance?

If the property is in a Special Flood Hazard Area (SFHA), then yes, your DSCR lender will require landlord insurance to protect you financially and ultimately protect their collateral security interest in the property. Flood insurance is not included in landlord insurance policies. Lender coverage requirements may vary.

Are rental properties with DSCR loans required to have landlord insurance?

Yes! Coverage must include dwelling, liability, and loss of rent, but flood insurance is separate. Lender coverage requirements may vary.

How can landlords optimize insurance for DSCR loans?

Compare quotes from multiple insurers, bundle landlord and flood insurance for discounts, and ensure compliance with lender requirements—especially in flood-prone areas.

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