Owners of properties at high risk of flooding will from now find it easier to get insurance, the Association of British Insurers (ABI) has said.
Parts of the UK have been devastated by flooding
Insurance companies have committed to continue to insure at-risk properties where new flood defences will be in place within five years, it said.
Previously, insurers had said they would cover these properties only until 2007.
The agreement could benefit owners of an estimated 100,000 properties.
"The insurance industry is now committed to ensuring that flood insurance remains available to existing customers where flood defences will be delivered within five years," said Stephen Hadrill, ABI director general.
"This is good news for the millions of homeowners and firms who rely on insurance for financial protection," he added.
In response, the government said it would maintain the current level of funding for flood defences and ensure that new developments did not increase the risk of flooding.
In 2002 the government and insurers came to an agreement that homes at risk of flooding would still be offered insurance.
However, some insurers had complained that the flood defence projects were slow to start and that they may have to start refusing insurance cover.
The new deal agreed between the government and the ABI on Friday will secure insurance rights until at least 2010, while planned flood defences are completed.
But in areas where there are no flood defences planned it could be difficult for homeowners to find insurance from 2007.
In 2007 an earlier commitment to insure all homes at flood-risk will expire.
Last week, in a report, insurer More Than said there would be more frequent floods in the future.
It said up to 3.5 million homes in the UK could be at risk from flooding.
In particular, the report expressed concern at plans to build 200,000 new low-cost homes on flood plains in south-east England.