Despite the availability of policy tools to mitigate property damage, relief costs for disasters continue to rise. This paper presents a framework for analyzing flood mitigation policies and policy design challenges in the United States. The system dynamics model prepared for this research was developed from qualitative data collected from over 300 sources, including the extant literature on natural disasters, statements made by disaster experts, government documents, policy analyses, and federal disaster mitigation policies. The generic structure developed for this research, the flood-1 model, explains the dynamics of major pressures in any flood-prone community. Eleven policies were analyzed against three scenarios to show the benefits and burdens of several types of mitigation policies. The policies selected in this analysis reflect the incentives established in the federal government’s Community Rating System (CRS). In this paper, I show how the system dynamics model was used as a theoretical framework and policy analysis tool to explain the policy design challenges in every flood-prone community.