WASHINGTON — Only 30 percent of flood-prone homes in the United States carry flood insurance, leaving a massive protection gap that forces homeowners to rely on federal disaster assistance or personal savings after a flood event, according to a new study from the First Street Foundation.
The protection gap is largest in inland areas that are at risk from river flooding and heavy rainfall events but are not in designated Special Flood Hazard Areas where flood insurance is required as a condition of federally backed mortgages. Homeowners in these areas often believe they are not at risk because they are not in a mapped flood zone.
The First Street Foundation's flood risk model, which incorporates climate change projections, estimates that 14.6 million properties in the United States face significant flood risk that is not reflected in FEMA's current flood maps — meaning that millions of homeowners are unaware of their actual flood exposure.
For restoration contractors, the flood insurance gap creates a challenging dynamic: homeowners without flood insurance often cannot afford to pay for professional restoration services, leading to incomplete remediation, mold growth, and long-term structural damage. Several states have developed disaster assistance programs to bridge the gap, but funding is typically limited.
The NFIP's Risk Rating 2.0 methodology, which took effect in 2021, has increased awareness of flood risk by providing more accurate, property-specific risk information. However, the higher premiums that result from more accurate risk assessment have also driven some policyholders to drop their flood insurance coverage.
