Your basement flooded and you have $35,000 in damage. You call your insurance company and they deny the claim in about 30 seconds. The reason? Your homeowners policy explicitly excludes flood damage, and that exclusion is buried in section 4, paragraph 3 of your 47-page policy document.
Insurance companies define "flood" as water that touches the ground before entering your home. Rain through a broken window? Covered. A burst pipe? Covered. But if heavy rain causes ground water to seep through your foundation or a nearby stream overflows into your yard and then your house, that's a flood - not covered.
The National Flood Insurance Program offers coverage starting at $400-600/year for homes outside high-risk zones. That buys you $250,000 in building coverage and $100,000 in contents coverage. If you're in a designated flood zone, expect $1,200-3,000/year, and your mortgage lender will require it anyway.
Private flood insurance entered the market in recent years and often beats NFIP pricing by 20-40% for low-risk properties. These policies also cover basements and additional living expenses - things NFIP excludes. Get quotes from both before assuming the government program is your only option.
The math is brutal but clear. One inch of water in a 2,000 square foot home causes roughly $25,000 in damage. Six inches hits $50,000-75,000 once you factor in drywall, flooring, electrical, and mold remediation. If your home has any chance of flooding - and FEMA says 99% of US counties have experienced flood events - $500/year is cheap insurance against financial ruin.