Flood Coverage: The Insurance Gap That Could Wash Away Your Retirement Plan

Jeremy Keil explores how to identify if flood insurance is a gap in your retirement insurance coverage and what you can do about it.

Most retirees spend a lot of time thinking about investment risk.

They worry about market downturns, inflation, taxes, healthcare costs, and whether their savings will last.

Those are all legitimate concerns. But there’s another risk that can derail a retirement plan almost overnight, and it’s one many homeowners don’t realize they’re carrying.

Flood risk.

In this episode of Retire Today, I explored a question that I have become increasingly more aware of after two highly unusual flood events occurred within six months of each other in the Milwaukee area in 2025: Should you buy flood insurance in retirement?

What caught my attention wasn’t just the flooding itself. It was the number of homeowners who were shocked to learn that their homeowner’s insurance didn’t cover the damage.

The reality is that for most homeowners, flood damage is specifically excluded from standard homeowner’s insurance policies.

The Assumption That Creates the Problem

When I talk with people about flood insurance, the most common response is simple:

“I don’t live in a flood zone.”

Sometimes that’s true.

Sometimes it isn’t.

The bigger issue is that many people have never actually checked.

According to the National Flood Insurance Program, nearly one-third of flood insurance claims come from properties outside of high-risk flood areas.

Flooding isn’t limited to coastal communities or homes located directly on rivers.

Heavy rainfall, snowmelt, drainage changes, new construction, and other environmental factors can all contribute to flooding in areas that have never experienced significant problems before. As weather patterns continue to produce more extreme events, many homeowners are discovering risks they didn’t previously consider.

The first step isn’t deciding whether you need flood insurance–it’s understanding your actual risk.

A Client Story That Changed My Perspective

Last year, my team was reviewing insurance coverage with a client when we noticed something interesting.

They didn’t have sewer backup coverage or sump pump failure coverage. As we discussed their situation, they explained that they didn’t have a basement because their property sat in an area with a high water table. That led to a different conversation.

They had been wondering about flood insurance for years.

They simply didn’t know where to get it.

We directed them to resources through the National Flood Insurance Program, and they ultimately purchased a flood insurance policy.

A few months later, the major flood event hit their neighborhood.

What they didn’t realize at the time was how fortunate their timing had been.

Flood insurance generally includes a 30-day waiting period before coverage takes effect. Fortunately, their policy had been active for seven days when the flood occurred.

The damage to their home ultimately resulted in a claim payment of approximately $93,000.

Without the policy, that cost would have come directly from their own assets.

The Retirement Question Most People Don’t Ask

When evaluating flood insurance, many people focus on a single question:

Do I need it?

I think there’s a better question.

If your home suffered significant flood damage tomorrow, where would the money come from?

Would it come from:

• Your emergency fund?
• A brokerage account?
• Retirement savings?
• A home equity line?
• Some combination of all four?

Every insurance decision is ultimately a tradeoff.

You’re deciding whether to retain a risk yourself or transfer that risk to an insurance company.

For retirees, that decision deserves special attention because major unexpected expenses don’t just affect a home. They can affect retirement income, investment withdrawals, tax planning, and long-term financial security.

A six-figure repair bill has a way of changing a retirement plan very quickly.

Insurance Exists for Low-Probability, High-Cost Events

One of the reasons people struggle with flood insurance is that floods often feel unlikely.

That’s true.

Insurance is designed for unlikely events.

Most people don’t expect their home to burn down either. That doesn’t mean homeowner’s insurance is unnecessary.

Flood insurance follows the same logic.

You’re protecting against an event that may never happen but could create a substantial financial burden if it does.

When viewed through that lens, the decision becomes less about predicting whether a flood will occur and more about determining whether you’re comfortable self-insuring against the potential loss.

Four Steps to Evaluate Your Flood Risk

The National Flood Insurance Program recommends a straightforward process:

1. Understand your property’s flood risk.
2. Evaluate whether flood insurance makes sense for your situation.
3. Prepare your home and document your belongings.
4. Know what steps to take if flooding occurs.

Those first two steps are especially important because they help replace assumptions with information.

Retirement planning works best when decisions are based on facts rather than guesses.

The same principle applies here.

The Bottom Line

Retirement planning isn’t just about growing wealth.

It’s also about protecting it.

Many retirees spend years optimizing investments while overlooking risks that could have a much more immediate impact on their financial lives.

Flood insurance may or may not be appropriate for your situation.

But before deciding, take the time to understand your property’s risk, review your homeowner’s policy, and ask yourself one important question:

If a flood happened tomorrow, where would the money come from?

The answer may tell you more than any flood map ever could.

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About the Author:

Jeremy Keil, CFP^®, CFA is a retirement financial advisor with Keil Financial Partners, author of Retire Today: Create Your Retirement Income Plan in 5 Simple Steps, and host of the Retirement Today blog and podcast, as well as the Mr. Retirement YouTube channel.

Jeremy is a contributor to Kiplinger and is frequently cited in publications like the Wall Street Journal and New York Times.

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Additional Links:

• Buy Jeremy’s book – Retire Today: Create Your Retirement Master Plan in 5 Simple Steps
• Floodsmart.gov
• “Flood Insurance: What It Costs and Why You Need It” by Donna LeValley, Kiplinger.com

Connect With Jeremy Keil:

• Keil Financial Partners
• LinkedIn: Jeremy Keil
• Facebook: Jeremy Keil
• LinkedIn: Keil Financial Partners
• YouTube: Mr. Retirement
• Book an Intro Call with Jeremy’s Team

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