I'm not sure I understand your hesitation just because it's a federally run program. Are you going to not get medicare or social security because it's federally run? If you have no other options, medicare is better than nothing. Federally run flood insurance is again better than nothing.

You do have a short term loan with a low interest rate - but if you do lose that house to flooding, can you afford to rebuild it without flood insurance? I guess there's a chance to get money from FEMA if you don't have flood insurance.

A number of years ago, when I was in grad school, a tropical storm parked over the city I was living in for several hours - sending rain gushing through the city, and causing a ton of damage & flooding. Someone called me in the morning and said "are you okay?" I was living at 19th St & basically all the houses from 17th street on were condemned from the flooding. Most of the people did not have flood insurance because there was a flood wall on the river - but the flood wasn't from the river rising, it was from all the rain. I'd gotten knocked over and swept across the road from asphalt being swept down a hillside when I'd walked home from school.

So. Flood insurance seems like a good idea to me, especially if you know you live in a flood plain. although, I'm always absolutely boggled that people live in flood plains.