The gap between US flood losses and the portion of them that is insured has widened to roughly 65%, according to a Moody’s analysis reported this month — leaving households and local governments exposed to a shortfall that could reach into the hundreds of billions of dollars.
Moody’s puts aggregated uninsured flood exposure at between $375 billion and $1 trillion, depending on severity, with the lower figure corresponding to a one-in-100-year event.
The Policy Count Is Falling
The protection gap is widening in part because participation in the National Flood Insurance Program has been shrinking for years.
- Roughly 470,000 NFIP policies were lost between 2018 and early 2026
- Since 2009, 5.6 million policies have left the programme
That decline is happening while flood exposure grows, not shrinks.
Why the Maps Understate the Risk
Moody’s flags a structural problem in how flood risk is assessed. Households and local governments have long relied on FEMA’s Special Flood Hazard Area maps, which are based primarily on riverine flooding.
Those maps generally do not account for:
- Storm surge
- Sea level rise
- Extreme precipitation
The practical consequence is that a property can sit outside a designated high-risk zone, carry no flood insurance because no lender required it, and still flood. A substantial share of flood claims historically come from properties outside high-risk zones.
The Cost Shifts to Local Government
When uninsured losses occur, the bill does not disappear — it moves. Moody’s notes that costs frequently fall on cities and counties, particularly for infrastructure repair, debris removal and temporary housing.
That exposure is growing as federal disaster funding faces proposed cuts, including to FEMA programmes. States with high reliance on federal disaster aid are most exposed; Louisiana has drawn more than 5% of its revenue from federal disaster aid in recent years.
For municipalities, the analysis frames this as a credit risk. For homeowners, it lands more directly: less federal backstop means more of the rebuild is yours.
What Homeowners Should Actually Do
Assume you are not covered. No standard homeowners policy covers flood. Not from a river, not from storm surge, not from rainfall accumulation. This is the single most common insurance misunderstanding in the country.
Do not rely on the flood map alone. Being outside a Special Flood Hazard Area means your lender will not compel you to buy coverage. It does not mean you will not flood.
Price it anyway. Outside high-risk zones, flood coverage is comparatively inexpensive — and both the NFIP and a growing private flood market write it. Renters can buy contents-only flood coverage, which is cheaper still and almost never purchased.
Check the waiting period. NFIP policies typically carry a 30-day wait before coverage begins. Buying as a storm approaches does not work.
Sources: Insurance Journal, “Flood Insurance Gap Will Squeeze Local Governments, Homeowners, Moody’s Says,” 13 July 2026 and Moody’s, “US flood risk: a country-level analysis.”
For what your policy does and doesn’t include, see our home insurance coverage guide.