The Insured Flood Loss Gap: Claimed Against Paid

Read this before the numbers

A payout below assessed damage is the normal output of a flood policy, not a sign that something went wrong. Four structural features of NFIP coverage produce a gap on perfectly correctly handled claims.

• The deductible. Every NFIP policy carries one, and it is subtracted before payment. On a small loss the deductible is a large share of the claim, which is why the ratio is lowest in the smallest damage band.
• The coverage limit. NFIP building coverage for a residential structure tops out at $250,000. Assessed damage above that cannot be paid under the policy whatever the assessment says, per FEMA FloodSmart, NFIP types of coverage.
• Actual cash value settlements. Where a policy settles on an actual cash value basis rather than replacement cost, depreciation is deducted. FEMA FloodSmart, NFIP types of coverage states that contents are covered for their value at the time of the damage rather than their original cost, which is visible in the contents figures below.
• Exclusions. Basement finishings, detached structures, landscaping and certain personal property sit outside or are restricted under NFIP building coverage. Damage to them can be assessed and still fall outside what the policy pays.

Nothing here identifies an insurer, an adjuster or a claim, and nothing supports a conclusion that any claim was handled incorrectly. The dataset records no deductible, coverage limit, settlement basis or exclusion, so no individual gap can be attributed to a cause. What follows is a statistical record of the distance between two fields in a public dataset.

The payout ratio nationally

Payout as a share of assessed damage	Claims	Share of claims
Below 50%	33,544	7.0%
Below 75%	83,313	17.4%
Below 90%	163,699	34.1%
At or above 100%	128,198	26.7%
Paid nothing	7,779	1.6%

The median claim settles at 95.8% of assessed damage and 26.7% of claims pay at or above the assessment, so this is a two-sided distribution rather than a systematic shortfall. The tail matters more than the median: 7.0% of claims settle below half the assessed figure, and 1.6% pay nothing at all against a recorded damage amount, which is what a denied or below-deductible claim looks like in this file.

The gap widens as the loss gets larger

Assessed building damage	Claims	Median payout ratio	Share settling below 90%
$1,000 to $10,000	108,353	73.4%	86.3%
$10,000 to $25,000	88,332	91.8%	38.5%
$25,000 to $50,000	75,635	96.5%	20.1%
$50,000 to $100,000	107,535	98.4%	10.1%
$100,000 to $250,000	83,034	99.2%	6.3%
Above $250,000	16,979	96.9%	28.5%

The shape here has a clean structural reading at both ends. In the $1,000 to $10,000 band the median ratio is 73.4%, because a fixed deductible is a large proportion of a small loss. In the above $250,000 band it falls to 96.9%, because the $250,000 building limit truncates the payment. The middle bands sit highest. Depth is part of the same story: our report on the water depth damage curve shows median damage rising steeply through the first two feet, which is the range where the deductible still bites hardest.

Water depth	Claims	Median payout ratio
0 ft	104,033	93.7%
1 ft	142,765	96.8%
2 ft	58,860	97.1%
3 ft	29,933	96.9%
4 ft	17,445	96.8%
5 ft	10,099	96.4%
6 ft	7,133	96.2%
7 ft	4,761	96.4%
8 ft	4,391	96.2%
9 ft	2,694	96.7%
10 ft	2,620	96.6%

Where the gap is widest by state

State	Claims	Median payout ratio	Share below 90%	Share paying in full or above
Delaware	457	79.2%	73.7%	7.9%
Colorado	407	81.0%	69.3%	11.1%
Rhode Island	383	83.3%	63.7%	7.8%
Illinois	4,190	85.8%	58.6%	17.8%
Massachusetts	2,939	86.8%	57.3%	10.4%
Ohio	2,491	87.6%	55.8%	15.3%
New Hampshire	559	87.6%	54.9%	11.3%
Connecticut	1,525	87.8%	54.7%	14.5%
West Virginia	2,614	87.9%	55.8%	12.9%
Maryland	2,126	87.9%	55.4%	16.2%

The spread between Delaware at 79.2% and Texas at 98.2% is wide, and the dataset does not say why. Three explanations fit and none can be separated out here. Low-ratio states tend to carry a higher share of small claims, where the deductible dominates. They also tend to have older housing stock with basements, where NFIP coverage of below-grade finishings is limited by policy language rather than by assessment. And the mix of residential against commercial policies differs by state, which changes the applicable limits. Our report on flood loss by building type sets out that mix.

The building coverage limit

The clearest single driver of the gap is a number written into the programme. NFIP building coverage for a one-to-four family residential structure is capped at $250,000. 16,952 claims in this sample record assessed damage above that figure.

94.3% of those claims settle at or within $1,000 of the limit. That is the limit working as written. The practical consequence is that assessed damage above $250,000 needs private excess flood cover or is self-funded, and on a large residential flood loss the insurance payment is a known ceiling rather than a negotiable figure.

Contents coverage is a separate problem

Building and contents are two separate NFIP purchases. A policyholder can hold building coverage and no contents coverage at all, and most appear to. Only 35.2% of the 626,886 claims retrieved record any payment on a contents claim, against 39.4% that record contents damage.

Measure	Claims	Share of all claims retrieved
Contents damage recorded	247,023	39.4%
Any amount paid on a contents claim	220,377	35.2%
Contents damage of at least $1,000 with a paid figure recorded	224,430	35.8%
Contents damage recorded but nothing paid	9,416	1.5%

Where both a contents damage amount and a contents payment are recorded, the median contents payout ratio is 85.1%, below the 95.8% figure for buildings. The structural reading is depreciation: contents are generally settled on an actual cash value basis, so a five-year-old sofa is paid at five-year-old value rather than replacement cost. That is written into the policy form and applies before any question of how a claim was handled. Our contents restoration report measures how much of a flood loss sits in the contents.

Data quality and the cleaning applied

Issue	Claims affected	How we handled it
No usable damage and paid pair	133,185	Excluded. A payout ratio needs both a non-zero assessed damage amount and a recorded paid amount.
Assessed damage below $1,000	13,833	Excluded. Values of a few dollars produce payout ratios in the thousands and distort every mean. The lowest observed damage values behave like placeholders rather than assessments.
Water depth recorded as exactly 99	13,551	Excluded from the depth table. This is a sentinel value, not a measurement.
Negative water depth	17,085	Excluded from the depth table. The dataset uses negative values for water below the first floor.
Water depth above 20 feet	30,953	Excluded from the depth table. The field runs to several hundred feet, which is not plausible.

The exclusion of very small damage amounts matters. Left in, the mean payout ratio across the file runs into the hundreds, driven by claims recording one dollar of assessed damage against a five-figure payment. After cleaning, the mean is 93.3% against a median of 95.8%, which is a sane distribution. Medians are used throughout for the same reason.

Method

Reproduce this

What this does not show

Questions this report answers

What is the insured flood loss gap?

It is the difference between the damage assessed on a flood insurance claim and the amount the policy pays. Across 479,868 NFIP building claims with a loss year of 2015 or later in FEMA data, the median payout is 95.8% of assessed damage.

Does a gap mean the claim was underpaid?

No, and this report should not be read that way. A deductible is subtracted from every NFIP claim, building coverage is capped at $250,000 for a residential structure, contents are generally settled at depreciated value, and several categories of damage sit outside the policy. All four produce a gap on a claim handled entirely correctly.

How much flood insurance can you buy?

Under the NFIP, building coverage for a one-to-four family residential structure is capped at $250,000, with contents coverage purchased separately. 16,952 claims since 2015 record assessed damage above that figure, and 94.3% of those settle at or near the limit in FEMA data. Cover above it has to come from a private excess flood policy.

Why is the payout ratio lowest on small claims?

Because the deductible is fixed and the loss is not. In the $1,000 to $10,000 damage band the median payout ratio is 73.4% in FEMA data, against 95.8% across all claims.

Why is the contents payout ratio lower than the building ratio?

Contents are generally settled on an actual cash value basis, which deducts depreciation, while building claims are more often settled on replacement cost. The median contents ratio in FEMA data is 85.1% against 95.8% for buildings.

Which states have the widest gap?

Among states with at least 300 claims, the lowest median payout ratio is 79.2% in Delaware and the highest is 98.2% in Texas, per FEMA data. The dataset does not record why, and claim size mix, housing stock and policy mix are all plausible contributors.

Can I reuse this data?

Yes. The tables and derived figures are released under CC BY 4.0 with attribution to Remediation Insider. The underlying claims data is public and available from FEMA.