The history of flood insurance is very unique. Because of frequent flooding of the Mississippi River during the 1960s and the rising cost of taxpayer funded disaster relief for flood victims, in 1968 Congress created the National Flood Insurance Program (NFIP). It has three mandates: to provide residential and commercial insurance coverage for flood damage, to improve floodplain management and to develop maps of flood hazard zones.

While the comprehensive section of an auto insurance policy covers flood damage to vehicles, there is no coverage for flooding in standard homeowners, renters or commercial property insurance policies. It is available in a separate policy from the NFIP and from a few private insurers. Despite efforts to publicize this, many people exposed to the risk of floods still fail to purchase flood insurance.

It was the widespread flooding associated with Hurricane Katrina in 2005 that drew attention to the NFIP and set in motion debate about how to improve it. Funding was due to expire in September 2008 but because lawmakers in the House and the Senate have not been able to agree on proposals for change, the expiration date was extended until September 2009, without any modifications.