You wouldn’t be provided with a fixed lump sum, but rather your costs would be covered up to a limit. So it’s about determining the expected value of losses fo

You wouldn’t be provided with a fixed lump sum, but rather your costs would be covered up to a limit. So it’s about determining the expected value of losses for a given risk. You’re right that given a long enough time, there is a near-certain chance of a flood, but the question is more about how much that’s likely to cost. That is entirely insurance.