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Most people ages 55 to 65 either failed or barely passed a 13 question true/false quiz on Social Security.
While many near-retirees expect Social Security to be their largest source of income in retirement, they do not necessarily know how to claim to get the most benefits.
Test your knowledge to see how much you know about the program.

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Many near retirees expect Social Security to be their largest source of income when they stop working.
Yet, those who are on the brink of their so-called golden years fall short when it comes to knowledge about the program’s rules and what they can personally expect, according to a new survey from MassMutual.

When put to the test with a 13 question true/false Social Security quiz, 78% of respondents ages 55 to 65 failed or barely passed. That includes 41% who failed and 37% who got a D.
Less than 1% of the 1,500 respondents who took the quiz in January got a perfect score by answering all 13 questions correctly.
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This year’s respondents fared worse in MassMutual’s quiz than they did in 2023, when 69% either failed or barely passed.
To test your knowledge on Social Security, decide whether you think the following statements are true or false and compare your answers to the answer key below.

True or False?

1.      In most cases, if I take benefits before my full retirement age, they will be reduced for early filing.
2.      If I am receiving benefits before my full retirement age and continue to work, my benefits might be reduced based on how much I make.
3.      If I have a spouse, he or she can receive benefits from my record even if he or she has no individual earnings history.
4.      If I have a spouse and he or she passes away, I will receive both my full benefit and my deceased spouse’s full benefit.
5.      Generally, if I am in a same-sex marriage, there are different eligibility requirements when it comes to Social Security retirement benefits.
6.      The money that comes out of my paycheck for Social Security goes into a specific account for me and remains there, earning interest, until I begin to receive Social Security benefits.
7.      If I get divorced, I might be able to collect Social Security benefits based on my ex-spouse’s Social Security earnings history.
8.      Under current law, Social Security benefits could be reduced by 20% or more for everyone by 2035.
9.      Under current Social Security law, full retirement age is 65 no matter when you were born.
10.   If I file for retirement benefits and have dependent children age 18 or younger, they also may qualify for Social Security benefits.
11.   If I delay taking Social Security benefits past the age of 70, I will continue to get delayed retirement credit increases each year I wait.
12.   Social Security retirement benefits are subject to income tax just like withdrawals from a traditional IRA account.
13.   I must be a U.S. citizen to collect Social Security retirement benefits.

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Answers:

1.      True (92% answered correctly)
2.      True (84%)
3.      True (75%)
4.      False (70%)
5.      False (70%)
6.      False (65%)
7.      True (59%)
8.      True (58%)
9.      False (55%)
10.   True (53%)
11.   False (48%)
12.   False (38%) (Note: While both Social Security and IRA income may be taxed, special rules limit taxes on Social Security income to only up to 85% of benefits.)
13.   False (23%)

Social Security literacy helps you avoid ‘tragic mistakes’

The question most respondents were able to answer correctly was whether their Social Security benefits would be reduced if they claimed earlier than their full retirement age. Most respondents, 92%, correctly answered that they will.
However, fewer than half of respondents, 48%, were able to correctly say whether there’s a benefit to delaying benefits past age 70 — there isn’t.

If you realize at, say, age 72, that there’s no longer an advantage to holding off on receiving benefits, a six-month look-back period will let you recoup some of the money you would have received. But any benefits you could have received dating back longer than six months are lost, according to David Freitag, a financial planning consultant and Social Security expert at MassMutual.
Knowing your Social Security full retirement age — the point when you are eligible to receive 100% of the benefits you’ve earned — is necessary to make a good claiming decision, Freitag said.
Yet, almost half of near-retirees, 45%, do not know the current full retirement age.
A wave of baby boomers is expected to turn 65 in the next few years, which has been dubbed a “silver tsunami.” While age 65 is when individuals become eligible for Medicare, Social Security’s full retirement age is generally age 66 to 67, depending on a person’s date of birth.
“The window opens at 62 and it closes at 70,” Freitag said of Social Security retirement benefit claiming. “You’ve got to figure those decisions into that period of time, or you’ll make tragic mistakes, and that’s not a good thing.”

Age 65 is important because the Medicare penalty can be very significant if you do not sign up for health coverage on time, Freitag said.
Figuring out what you will do about health insurance and when you plan to claim Social Security are the two anchor points from which to start in the retirement planning process, Freitag said.
“Get those two things anchored down, and then you can start to make the decisions around those two points,” Freitag said.
Even as near-retirees’ knowledge of Social Security falls short, 40% expect the program will be their biggest source of income in retirement. That is followed by a 401(k) or 403(b) plan, with 17%; pension, 13%; and investments, 11%.
However, 44% said they do not know approximately how much income their Social Security retirement benefits will replace.Don’t miss these stories from CNBC PRO: More

The cost of housing is generally expensive across the board for Americans, whether you’re a renter or an aspiring homeowner.
While both housing and rent prices have outpaced wage growth in most areas, renting can be the smarter financial choice in some markets, said Susan M. Wachter, a professor of real estate and finance at The Wharton School of the University of Pennsylvania. 

Sturti | E+ | Getty Images

The cost of housing is generally expensive across the board for Americans, whether you’re a renter or an aspiring homeowner.
While both home prices and rent have outpaced wage growth in most areas, renting can be the smarter financial choice in many markets, said Susan M. Wachter, a professor of real estate and finance at The Wharton School of the University of Pennsylvania. 

“The cost of homeownership versus renting has been [making it] daunting to become a homeowner. It’s less expensive to be a renter in most markets in the U.S.,” Wachter recently told CNBC.
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There is no one-size-fits-all answer when you’re deciding whether to buy or rent. What’s right for you will depend on factors such as monthly income, outstanding debt balances and how long you plan to remain in that home, said Jacob Channel, a senior economist at LendingTree.
It’s generally cheaper to rent than own in the country’s 50 largest metropolitan areas, according to a recent study by LendingTree. Between median rent costs and median homeowner costs for those with mortgages, tenants came out ahead by $563 per month in 2022.

Owning a house may be ideal, but costs remain high

Owning a home can help you build wealth, and after you finish paying the mortgage, owning a place will probably be cheaper than a rental, Channel said.

You also have more freedom as a homeowner that renters may not have, such as the option to install new appliances, paint or do even small home-improvement projects including mounting a TV to a wall, Channel explained.
“If you want to paint your walls neon pink, go for it,” he said.

The costs of owning a home can be more stable compared to rent prices. Your mortgages may be fixed for up to 30 years, while the rent price for a unit could increase with each lease renewal.
Homeowners may also have more protections and options than renters do if they find themselves struggling financially.
Yet, the upfront cost of a down payment is high for most Americans, Wachter said.
“Stability is clearly an advantage to a homeowner, but the cost and the down payment can make it unaffordable,” she said. 
The median down payment for single-family homes and condominiums in the U.S. was $35,050 in the third quarter of 2023, according to ATTOM, a property data site. This was a 12.2% increase from $31,250 in the prior quarter.

House prices grew 7% in 2023, far exceeding both wage growth and rents, Wachter said.
Mortgage rates also remain high for potential homebuyers, spiking back to 7.06% from 6.87%. The interest rate affects the monthly cost of a home, which can make or break affordability for a homebuyer.

Rent prices are also expensive

The median asking rent price rose to $1,964 in January, up 1.1% from a year ago, according to real estate site Redfin. While rent prices are slightly higher, growth is slowly declining from record highs during the Covid-19 pandemic.
When you compare upfront costs, renting is likely to be less expensive than buying a house, Channel said.
The total immediate cost to rent a unit may include a security deposit and a potential broker’s fee, which is still a lot less money compared to a down payment.
Even if you have enough money to buy a house, there are incentives to renting. There are millionaires in the U.S. who can afford to buy a property but choose to rent, Channel said. Your landlord is responsible for physical repairs and infrastructural upkeep of the apartment, as well as making sure to pay the property taxes.
While rents have not increased at the same rate as home prices, rent costs have outpaced wages, making it more difficult for renters to save for a down payment, Wachter said.
“There are renters who are simply discouraged from saving because it has become so difficult in some markets to become a homeowner,” she said.

In fact, rent costs are so high that half of renters are cost burdened, meaning they spend more than 30% of their monthly income on rent, according to recent analysis by the Joint Center for Housing Studies at Harvard University. 
Some indicators show that rent prices are stabilizing due to vacancy rates, which came back to 6.6% in the fourth quarter of 2023, and remained flat from the prior quarter at the highest level since 2021, according to the Federal Reserve. Vacancy rates have been improving in recent years as more newly built apartment units come on the market.Don’t miss these stories from CNBC PRO: More

Smart Tax Planning

The IRS plans “dozens of new audits” of corporate jet usage as part of its increased scrutiny of large corporations, complex partnerships and top earners.
The agency believes some companies overstate business deductions when using corporate aircraft for mixed business and personal travel.
Plus, some individuals may be using corporate jets for personal trips without reporting the perk as income.

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The IRS on Wednesday unveiled plans for “dozens of new audits” of corporate jet usage as part of its increased scrutiny of large corporations, complex partnerships and top earners.
More than 10,000 corporate jets operate in the U.S., and the agency believes some companies overstate deductions while using aircraft for mixed business and personal travel. Plus, individuals may not be reporting personal trips via corporate jet as income, the IRS said.

The agency will begin with a round of three to four dozen audits of corporate jet usage, focused primarily on corporations and complex partnerships. But future exams could expand to individuals, depending on the findings.

Business use of corporate aircraft can be a legitimate deduction, but there needs to be a clear breakdown of business versus personal travel and “record-keeping can be challenging,” IRS Commissioner Danny Werfel told reporters Wednesday on a press call.
“These aircraft audits will help ensure high-income groups aren’t flying under the radar with their tax responsibility,” he said.

Plans to reverse ‘historically low audit rates’

The agency’s latest plans are part of a broader effort to collect unpaid taxes by reversing “historically low audit rates” of large corporations, complex partnerships and higher earners, as Werfel discussed during a House Ways and Means Committee hearing last week.
The audit rate for taxpayers earning $1 million or more was 0.7% in 2019, compared to 7.2% in 2011, according to the IRS.

“The IRS is focused on increasing scrutiny on the complex high-income returns where there’s high risk of non-compliance and in some cases, purposeful tax evasion,” Werfel said during the press call on Wednesday.
The tax gap, or the difference between taxes owed and paid, was an estimated $688 billion for tax year 2021, the agency reported in October. More

The new FAFSA’s streamlined form eliminates questions about grandparent contributions, effectively creating a “loophole” for grandparents to fund their grandchild’s college fund without impacting their financial aid eligibility.
Middle-income families who have the capacity to save will benefit the most, according to Michael Green, a financial advisor at Apollon Wealth Management.

How the FAFSA’s grandparent ‘loophole’ works

The simplified FAFSA form now uses a new calculation called the “Student Aid Index” to estimate how much a family can afford to pay.
Previously, many factors went into how much aid students receive, including the total number of people in the household and the number of children in college, as well as various sources of income.

Under the old FAFSA rules, assets held in grandparent-owned 529 college savings plans were not reported on the form, but distributions from those accounts counted as untaxed student income. The formula could reduce aid by up to half of that income.
“That was a very serious penalty,” said higher education expert Mark Kantrowitz.
Now, this new formula pulls federal tax information directly from the IRS and slims 108 questions down to less than 50.

Middle-income families may benefit the most

Without those questions about other sources of income, middle-income families who have the capacity to save will benefit the most, according to Michael Green, a financial advisor at Apollon Wealth Management in Charleston, South Carolina.
Green advises his clients to open a 529 plan for their grandchildren to help them pay for college, when that fits with their financial goals, especially now that there’s less of a chance of it hurting their aid eligibility.
“If it’s possible to have them off the radar, it’s definitely helpful,” he said.
One caveat for parents, Green added, “You are taking the reins and giving it to someone else, that requires some thought and requires that families be on the same page.”
The grandparent owns and controls the account and that money can be considered an asset for their Medicaid eligibility purposes, which is another aspect worth noting for planning purposes.

Still, the idea of a loophole is not entirely new, according to Kalman Chany, a financial aid consultant and author of The Princeton Review’s “Paying for College.”
“There were always planning strategies that families could use when it came to third-party 529 plans,” Chany said.
And even now, colleges may still take some contributions from grandparents into account on the CSS profile to award nonfederal institutional aid, he added.
“Even with this change, you still need to look before you leap if grandparents are going to help pay for college,” Chany said.

The other advantages of 529 plans

Already, experts widely consider 529 plans the best way to save for college. Further, restrictions have loosened in recent years to include continuing education classes, apprenticeship programs and even student loan payments. And, as of 2024, families can also roll unused money from 529 plans over to Roth individual retirement accounts free of income tax or tax penalties.
Any additional change that encourages families to save more for college is beneficial, according to Kantrowitz.
“Expanding the capabilities of 529 plans and sheltering them more is a step in the right direction,” he said.
Correction: Michael Green is a financial advisor at Apollon Wealth Management in Charleston, South Carolina. An earlier version misidentified the state.
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Homeownership is out of reach for many Black Americans, but most still see it as a hallmark of success.
While homeownership can be a path to build wealth, a mortgage payment and other housing-related expenses may cause financial strain.
“Being ‘house poor’ doesn’t do much for you,” said Preston D. Cherry, a certified financial planner and the founder and president of Concurrent Financial Planning in Green Bay, Wisconsin.

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While homeownership is out of reach for many Black Americans, most still see it as a hallmark of success.
About 66% of Black Americans consider themselves successful in some way, according to a recent study by the Pew Research Center. Slightly more than half of those surveyed, 52%, believe homeownership is important for their definition of success.

Meanwhile, 82% said they feel the most successful when they can provide for their families, according to Pew, which surveyed 4,736 Black adults in the U.S. between Sept. 12 and Sept. 24.
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Those two markers of success can be at odds. While homeownership is known to be a path to build wealth, a mortgage payment and other housing-related expenses can cause financial strain, leaving you with little to spend on other expenses or save toward your goals.
“Being ‘house poor’ doesn’t do much for you,” said Preston D. Cherry, a certified financial planner and the founder and president of Concurrent Financial Planning in Green Bay, Wisconsin.

‘Homeownership has a lot more expenses than renting’

“Homeownership has a lot more expenses than renting: taxes, insurance, maintenance, down payment. All these factors need to be considered,” said Cherry, a member of CNBC’s Financial Advisor Council. 

Outside of the mortgage, property taxes and insurance costs, utility and maintenance costs also tend to be higher in a house than an apartment, Kamila Elliott, a CFP, co-founder and CEO of Collective Wealth Partners in Atlanta, previously told CNBC. Before you close the deal on a house, it’s important to have good estimates of those costs to anticipate what your realistic budget would look like.
“Understand what it is to be a homeowner and how things work,” said Elliott, who is also a member of CNBC’s Financial Advisor Council.

Owning a home might also leave you without enough money to fund other financial goals, such as paying down debt, providing for additional family members or saving for retirement, Cherry said.
In some markets, renting can be the smarter financial choice, says Susan M. Wachter, a professor of real estate and finance at The Wharton School of the University of Pennsylvania. 
“The cost of homeownership versus renting has been [making it] daunting to become a homeowner. It’s less expensive to be a renter in most markets in the U.S.,” Wachter said.
If you’re looking to provide for your family and can do that by renting as opposed to owning, “then that’s the way forward,” she said.

Give yourself grace. Homeownership will be there for you when you’re ready.

Preston D. Cherry
certified financial planner

How to build wealth without owning a home

When you compare upfront costs, renting is likely to be less expensive than buying a house. A rental unit’s security deposit and a potential broker’s fee are likely to be a lot less money compared to a down payment, said Jacob Channel, a senior economist at LendingTree.
Therefore, remember “there’s nothing wrong with being a renter,” and there are millionaires in the U.S. who could afford a house but still choose to rent, he said.
“At the end of the day, what good is being a homeowner when you can’t provide basic necessities for yourself and your loved ones?” he said.

While homeownership can create wealth over the long term, it’s not always the case. “Can you build wealth without homeownership? Yes. Rent and invest the difference,” Cherry said.
By being financially flexible, you may be able to accomplish and address more goals than being able to fund one goal, he said.
“Give yourself grace. Homeownership will be there for you when you’re ready,” Cherry said.
Join the virtual CNBC Equity and Opportunity Forum on March 21 at 1p.m. ET, where we’ll talk to corporate leaders about how they are navigating DEI efforts, working to engage in constructive conversations with employees and other stakeholders and potentially reframing initiatives as they work to create equity and opportunity for all. Register for free here.Don’t miss these stories from CNBC PRO: More

The Biden administration said on Wednesday that it would forgive $1.2 billion in student debt for 150,000 borrowers enrolled its new repayment plan.

President Joe Biden takes questions from reporters, after he delivered remarks in the State Dining Room, at the White House on November 09, 2022 in Washington, DC. 
Samuel Corum | Getty Images

The Biden administration said Wednesday it would forgive $1.2 billion in student debt for nearly 153,000 borrowers enrolled its new repayment program, called the Saving on a Valuable Education, or SAVE, plan.
The relief will go to borrowers who have been in repayment for a decade or longer, and originally took out $12,000 or less.

Borrowers usually get debt forgiveness under income-driven repayment plans, including SAVE, after 20 or 25 years of payments. But under the SAVE plan, those who borrowed less can get their debt canceled after just a decade.
In January, the Biden administration said it would soon start to forgive the debt of these borrowers who had signed up for its new plan.
“With today’s announcement, we are once again sending a clear message to borrowers who had low balances: if you’ve been paying for a decade, you’ve done your part, and you deserve relief,” U.S. Secretary of Education Miguel Cardona said in a statement.
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Eligible borrowers will begin receiving emails from President Joe Biden on Wednesday and do not need to take any further action to receive the relief, the U.S. Department of Education said.

After the Supreme Court blocked Biden’s sweeping student loan forgiveness plan last June, his administration has explored all of its existing authority to leave people with less education debt. 
It has now canceled debt for almost 3.9 million borrowers, totaling $138 billion in relief.
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The Biden administration has been working on a new student loan aid package that could come as soon as this year.
While Biden first attempted to cancel student debt through an executive order, he has now turned to the rulemaking process.
Here’s who may qualify.

President Joe Biden speaks about his economic plan at the Flex LTD manufacturing plant in West Columbia, South Carolina, on July 6, 2023.
Sean Rayford | Getty Images

Since the Biden administration’s first student loan forgiveness plan was rejected at the Supreme Court, it has been working on creating a new, legally viable relief package.
That debt cancellation could come as soon as this year. The alternative plan, which has become known as Biden’s “Plan B,” could forgive the student debt for as many as 10 million people, according to one estimate.

While Biden first attempted to cancel student debt through an executive order, he has now turned to the rulemaking process.
The U.S. Department of Education and the negotiators tasked with determining who will be eligible for the president’s revised aid have identified five groups of borrowers.

1. Those who owe more than they borrowed

Borrowers with outstanding federal student loan balances that exceed what they originally borrowed may be among those who qualify for the cancellation.
A person’s student debt can balloon for a number of reasons, said Nadine Chabrier, a senior policy and litigation counsel at the Center for Responsible Lending.
“Unfortunately, it is very common,” Chabrier said.

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Student loan servicers, the companies the Education Department contract with to service its debt, have a record of steering consumers into forbearances and deferments, she said. These options for struggling borrowers can keep loans on hold for many years, but interest often continues to accrue. 
Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers, denied that the companies benefit by veering from the government’s orders.
“We are incentivized to meet the requirements that the government sets, which includes giving borrowers the benefits that the law provides,” Buchanan said. “We are audited, and get business or lose it based on meeting those standards.”
Advocates have also said the interest rates on federal student loans are too high, especially for borrowers from the 1980s, who have rates exceeding 8%. Current fixed rates today can be nearly as high.

2. Borrowers in repayment for 20 years or more

Those who have been carrying their student debt for decades may also benefit.
With many of the Education Department’s repayment plans requiring 20 years or more of payments, such stories are common. Millions of Americans older than 60 are still paying off their student loans, research finds.
“There is both financial harm and psychological harm of being in debt for decades, especially when it feels like there is no hope that it will ever be repaid,” said Persis Yu, deputy executive director at the Student Borrower Protection Center.

3. Attendees of schools of questionable quality

In its revised relief package, the Biden administration notes it is looking to include student loan borrowers who attended career-training programs “that created unreasonable debt loads or provided insufficient earnings for graduates,” as well as borrowers who attended institutions with high student loan default rates.

4. People eligible for forgiveness who haven’t applied

The Education Department already has several programs that lead to student loan forgiveness, and as part of its new aid package, it is looking to identify those who may be eligible but just haven’t applied.
For example, the Public Service Loan Forgiveness program, signed into law by then-President George W. Bush in 2007, allows certain not-for-profit and government employees to have their federal student loans canceled after 10 years of on-time payments. In 2013, the Consumer Financial Protection Bureau estimated that one-quarter of American workers may be eligible.
However, the technical and often confusing requirements of the plan have acted as a barrier, experts say.

Student loan servicers also earn a fee per borrower per month, which advocates say discourages transparency around loan forgiveness opportunities.
“Instead of providing borrowers with access to the affordable pathway out of debt, decades of mismanagement and abuse have left these borrowers trapped in debt like hamsters on a hamster wheel with no way out,” Yu said.

5. Borrowers experiencing financial hardship

The Biden administration has also said it wants to forgive the debt of those experiencing financial hardship.
So far, it has proposed a set of factors that could identify struggling borrowers, such as those with student loan balances and required payments that are unreasonable relative to their household income, and people with high child care and health-care expenses.
It also said that financial hardship could be based on other debt obligations, disability or age, among other factors.Don’t miss these stories from CNBC PRO: More

Homeowners and renters insurance don’t cover flood risk. That requires a separate flood insurance policy.
Most U.S. residents have flood insurance through FEMA’s federal National Flood Insurance Program.
NFIP policies generally exclude personal property and other items stashed in a basement. Private insurers may cover more items, but it depends on the company and policy.
Severe weather and flooding are expected to grow more frequent and costly due to climate change.

A Johnson, Vermont, resident removes items destroyed in flooding of a finished basement in 2023.
Jessica Rinaldi/The Boston Globe via Getty Images

American basements are a hodgepodge of personal property, leveraged as storage units, man caves, game rooms, wine cellars, home bars and secondary living rooms.
The problem is: If your basement floods, your flood insurance policy likely won’t cover damages to most — if any — of your belongings.

It may be a consequential exception for policyholders as storms (and resulting flood damage) are expected to grow more intense due to climate change, experts said.
“You can put anything you want in your basement, but don’t expect it to be insured for floods,” said Peter Kochenburger, an insurance expert and visiting law professor at Southern University Law Center.

What is flood insurance?

Flooding is the “most common and costly natural disaster in the United States,” according to the Insurance Information Institute.
To that point, 99% of U.S. counties have experienced a flood since 1998 — and more than 40% of flood insurance claims are from outside high-risk flood areas, according to FEMA.
Flooding causes 90% of annual disaster damage in the U.S., according to the Federal Emergency Management Agency. Just an inch of water can cause roughly $25,000 of damage to a property, the agency said.

But homeowners and renters insurance policies don’t cover flood damage.
Consumers need separate insurance to cover physical damage caused by a flood, defined as water entering a home from the ground up. That may occur due to storm surge, heavy rainfall or an overflowed body of water like a lake or river.
(Homeowners insurance may cover water damage in some instances — burst pipes, sump pump backup, even water entering from the ceiling due to a collapsed roof — though insurers may require consumers buy additional coverage beyond a policy’s basic terms, experts said.)
Most people who have flood insurance get it through the federal government, via FEMA’s National Flood Insurance Program, experts said.

Americans had about 4.4 million residential NFIP policies at the end of 2023, according to FEMA. They had total coverage of $1.2 trillion.
Many homeowners go without coverage. On average, only 30% of U.S. homes in the highest-risk areas for flooding have flood insurance, according to the University of Pennsylvania’s Wharton Risk Center.
NFIP policies offer up to $250,000 of residential coverage for building structure (like the foundation and electrical system) and a maximum $100,000 for personal property (like clothing, furniture and electronic equipment).
Nearly 21,000 policyholders filed a claim in 2023, with an average payment of almost $46,000, according to FEMA data.
The average annual flood insurance premium was $700 in 2019, it said.
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Private insurers also offer flood policies, and may offer higher coverage than FEMA’s policies, according to the Insurance Information Institute.
There were 58 private companies writing flood insurance in 2020, the group said. The five largest by premiums in 2022 were American International Group, Zurich Insurance Group, Assurant, AXA and Berkshire Hathaway, respectively, it said.

What items aren’t covered in a basement?

A flood sign during a storm in Whittier, California, on Feb. 6, 2024.
Eric Thayer/Bloomberg via Getty Images

Basement coverage “is limited” through NFIP policies, FEMA said.
The agency defines a “basement” as any area of a building with a floor below ground level on all sides. Even rooms that aren’t fully below ground level — like sunken living rooms, crawlspaces and lower levels of split-level buildings — may still be considered basements, the agency said.
Its flood policies exclude the following items from coverage in a basement:

“Personal property” like couches, computers, or televisions
Basement improvements (such as finished flooring, finished walls, bathroom fixtures, and other built-ins)
Generators (and similar items)
Certain dehumidifiers

Items “stored in a basement, meaning they are not connected to a power source,” aren’t covered, FEMA said.
Consumers concerned about flood risk and insurance coverage should consider not putting their stuff in a basement, if possible, Kochenburger said. They should “move it to a storage unit or somewhere else” on higher ground, he said.

These basement items are included with an add-on

The following basement items are covered, but only if NFIP policyholders buy additional “contents coverage,” which is optional, and if connected to a power source, FEMA said:

Clothes washers and dryers
Air conditioners (portable or window units)
Food freezers and the food in them (excluding walk-in freezers)

Private insurance policies may offer broader property coverage in basements, depending on the insurer, said Don Griffin, vice president of policy and research at the American Property Casualty Insurance Association.

That may be via an add-on to a homeowners insurance policy, as with water backup from drains, for example, he said.
One silver lining to all this: Fewer U.S. homes are being built with basements. The share of new single-family homes with full or partial basements has fallen by more than half since the mid-1970s, from 45% to 21%, according to U.S. Census Bureau data as of 2022.
On Feb. 6, FEMA announced a proposal to update its NFIP program and potentially enhance basement coverage for policyholders.
“Policyholders with basements continue to be surprised that under the current Dwelling Form, the policy provides limited coverage in a basement,” FEMA wrote.
However, it’d likely take more than a year for consumers to see these changes enacted, Griffin said.

What items are included in a basement?

“Flood insurance’s primary focus is structure: the building itself,” Kochenburger said.
Here are examples of how NFIP policies cover building and structure in basements, FEMA said:

Central air conditioners
Fuel tanks and the fuel in them
Furnaces and water heaters
Sump pumps, heat pumps, and well water tanks and pumps
Electrical outlets and switches
Elevators and dumbwaiters
Certain drywall
Electrical junction and circuit breaker boxes
Stairways and staircases attached to the building
Foundation elements and anchorage systems required to support a building

Policyholders can also get compensation for cleanup costs such as pumping out trapped floodwater, treatment for mold and mildew and structural drying of the interior foundation, FEMA said.

You can put anything you want in your basement, but don’t expect it to be insured for floods.

Peter Kochenburger
visiting law professor at Southern University Law Center

As a precaution, the agency recommends documenting the manufacturer, model, serial number and capacity of equipment in your basement like furnaces, central AC units and appliances like freezers, washers and dryers. Should you experience flooding, the NFIP requires this information during the claims process, FEMA said.
Policyholders should review their flood insurance policy for a comprehensive list of covered items and expenses, according to FEMA.

‘Where it rains it can flood’

Flood risk is only expected to worsen due to global warming.
Extreme weather events like heavy rainfall, hurricanes and floods — which are “increasing in frequency and/or severity” — conservatively cost the U.S. close to $150 billion each year, according to the Fifth National Climate Assessment.
That sum is expected to rise in the near term, according to the 2023 report, which the federal government issues every four to five years.

The U.S. experienced 96 billion-dollar weather disasters in the two decades from 1983 to 2002, costing a total $546.3 billion in damages, according to The Pew Charitable Trusts. In the ensuing two decades — from 2003 to 2022 — those sums ballooned to 244 disasters and $1.95 trillion in costs, Pew found.
Annual losses from flooding are expected to grow by 61% by 2050, according to the Fifth National Climate Assessment.
Yet, there’s a shortfall in the number of properties insured for floods relative to those at risk, Griffin said.
About 14.6 million U.S. properties are at “substantial risk” of flooding, of which 5.9 million (and their owners) are underestimating their risk because they’re not within a designated FEMA Special Flood Hazard Area, according to a 2020 report by the First Street Foundation.
“Where it rains it can flood,” Griffin said. “That’s pretty much everywhere.” More