Texas Floods Highlight 98% Homeowner Insurance Gap

In the central region of Texas, which was recently hit by a severe storm, the area has long been known as the "canyon of flash floods" due to its narrow canyons and shallow soil. However, data shows that only a small number of homeowners in the region have purchased flood insurance. In Kerr County, where the Guadalupe River flooded and caused over 90 deaths, only 2% of homeowners have federal flood insurance. In the neighboring Kendall County, which was also severely affected, the insurance rate is less than 5%. In fact, in the 21 counties mentioned in the disaster declaration issued by Texas Governor Greg Abbott on July 5, none of the counties have a federal flood insurance participation rate of 10% or higher.

While the participation rate is low, it is not an isolated case. In the United States, flood insurance is primarily provided by the federal government through a program under the Federal Emergency Management Agency (FEMA) that has been in existence for 60 years. However, the vast majority of homeowners do not purchase it. Due to a lack of reliable data on flood risk, people are unaware of these risks, and as the risk continues to rise, purchasing flood insurance becomes increasingly difficult and costly. According to FEMA, 99% of counties in the United States have experienced flooding since 1996, but only about 4% of homeowners have purchased flood insurance.

As climate change exacerbates storms and cyclones that can cause flooding, this insurance gap is becoming increasingly problematic. Climate change may also exacerbate drought conditions in Texas, making it difficult for dry soil to absorb large amounts of rain in a short period of time, further exacerbating flash floods. In recent years, Texas has experienced several major extreme weather events, from hurricanes and wildfires to catastrophic cold snaps. Homeowners in the state are already facing significant increases in insurance premiums. According to a report released by the Neptune Flood Research Group in May, since FEMA introduced a new pricing model in 2021 to more accurately reflect the rising risk, the average premium for federal flood insurance in Texas has increased by 35%.

Some experts predict that Texas may soon follow in the footsteps of California and Florida, where insurance companies are withdrawing from high-risk areas or charging exorbitant premiums. "The real problem will become: what can local homeowners do?" said an assistant professor specializing in risk management and insurance at the University of Texas at Dallas. In addition, the impact of climate change is becoming increasingly apparent. For every degree Celsius increase in temperature, the atmosphere's water-holding capacity increases by about 7%, and global temperatures have risen by about 1.3 degrees Celsius since the industrial revolution. The 2023 U.S. National Climate Assessment points out that this additional moisture has exacerbated the severity of extreme precipitation events.

This makes the issue of flood insurance more urgent, and the agency responsible for regulating it, FEMA, is currently under review by the Trump administration. It is not yet clear whether plans to downsize the agency will affect the National Flood Insurance Program, which manages 4.7 million policies and $1.3 trillion in coverage responsibilities as of the end of 2023. Despite the fact that the central region of Texas is prone to flooding, the rainfall on July 4 was historically abnormal. The Colorado Climate Center director and professor of atmospheric science at Colorado State University, Russ Schumacher, said that between 1 a.m. and 7 a.m. that day, 19 monitoring points in an area of about 114 square miles (295.26 square kilometers) in Kerr County and its surrounding areas recorded a once-in-a-thousand-years flood event on the National Weather Service map.

A meteorologist who has worked for the National Weather Service and the National Oceanic and Atmospheric Administration (NOAA) for many years, Alan Gerard, said that the intensity of the storm made it difficult to simulate and predict. Gerard wrote in his Substack column, Balanced Weather, "This is a situation that meteorologists encounter multiple times a year: relatively minor atmospheric disturbances can converge and intensify heavy rainfall." In the summer of 2025, other regions of the United States also experienced dangerous flooding, including Ruidoso in New Mexico and Chicago.

As extreme weather becomes more frequent, combined with various obstacles that have historically led to low flood insurance participation rates, the problem is becoming increasingly complex. "The lack of flood insurance is the largest insurance gap we face nationwide," said a spokesperson for the Insurance Information Institute, an industry organization. Many homeowners are unaware of the risks they face. Few states require sellers to disclose flood risks, leaving buyers in the dark. FEMA's flood risk maps are typically updated every few years and do not fully reflect current risks. A 2023 analysis found that about 40% of NFIP claims came from outside the agency's designated high-risk flood zones, indicating significant flood risk in areas traditionally considered safe.

"One of the biggest factors contributing to the low rate of flood insurance is that people are unaware of the risks they face," said an expert from the Climate Adaptation Department of the Natural Resources Defense Council, a non-profit organization. "People are not told how vulnerable they are to flooding." Many American homeowners also have the misconception that their property is already protected from flood risk. According to a survey conducted by Trusted Choice, an organization representing members of the Independent Insurance Agents & Brokers of America, in 2024, more than half of respondents were unaware that standard homeowners insurance does not cover flood-related damage. Only homeowners in federally designated flood zones may be required to purchase flood insurance as a condition of obtaining a mortgage.

Homeowners who wish to purchase flood insurance may face numerous obstacles, especially in high-risk areas such as central Texas. According to the Insurance Information Institute, about two-thirds of flood policies nationwide are underwritten by the National Flood Insurance Program, with the remainder provided by dozens of private insurance companies. However, even federal flood insurance may be difficult to obtain, as only homeowners and renters in communities that commit to strengthening risk mitigation measures are eligible. More stringent building codes and other measures to enhance flood resilience will incur additional costs, leading some communities to choose not to meet these requirements.

However, without insurance payouts, many flood victims in the affected areas of Texas will struggle to rebuild. Even if someone manages to rebuild their home, they may not be able to afford the cost of protective measures to withstand the next storm. "Rebuilding is likely to return to its original state, and we will only be waiting for the next major flood to occur, waiting for the same losses to recur," said an assistant professor specializing in risk management and insurance at the University of Texas at Dallas.