Private Flood Insurance vs. NFIP
In the past, homeowners needed to purchase flood insurance through the National Flood Insurance Program (NFIP). However, some private insurance companies now offer independent policies, which may have higher limits and more coverage.
How private flood insurance and NFIP work
Flood insurance isn’t typically provided by your homeowners insurance policy, making it necessary to purchase a separate plan. Private flood insurance, like NFIP-backed insurance, is separated into the following two types of coverage:
Building coverage
This category protects the structure of your home and appliances, including:
- HVAC
- Plumbing and electrical systems
- Foundation walls
- Permanently installed carpet and cabinets
- Refrigerators, stoves, and built-in appliances
Contents coverage
This category pertains to your personal belongings, such as:
- Clothes, furniture, and electronics
- Portable and window AC units
- Microwave ovens
- Valuables such as art or jewelry (up to a limit of $2,500)
Private flood insurance and NFIP: Key differences
While private flood insurance and the NFIP offer similar policies, a private insurance company can typically provide more flexibility in coverage limits and options.
However, NFIP policies are overseen by the Federal Emergency Management Agency (FEMA) and can’t be canceled as long as you pay your premiums. Because of this, some homeowners prefer sticking with an NFIP policy for extra peace of mind.
| Private flood insurance | NFIP | |
|---|---|---|
| Building coverage limits | Up to $500,000, depending on the insurance company and your flood risk | Up to $250,000 |
| Contents coverage limits | Up to $250,000, depending on insurance company | Up to $100,000 |
| What it covers | Can cover personal belongings at full replacement cost Offers “loss of use” coverage (cost of living elsewhere while your home is repaired) | Pays out on personal belongings at depreciated value Doesn’t offer “loss of use” coverage |
| Wait period | Wait period as low as two weeks before policy activation | 30-day wait period before policy goes active |
| Availability | Options in all 50 states | May be limited in high-risk areas |
| Cancellation policy | Your provider can cancel your policy at renewal time, leaving you without coverage | Your policy will not be canceled as long as your premium is paid |
| Government protections | Not financially backed by the federal government | Backed by FEMA |
When comparing options, consider how much you could receive after suffering a complete loss from a flood.
NFIP flood insurance policies max out at $250,000 — after that, everything comes out of your pocket. In contrast, private flood insurance policies can cover rebuilds up to $500,000, possibly more.
If your area is prone to hurricanes, the difference in wait periods could be significant. NFIP policies go into effect 30 days after you are approved for coverage, while a private flood insurance policy kicks in in as little as two weeks, depending on your company.
Unfortunately, no flood insurance policy offers immediate coverage. But if it’s the beginning of hurricane season, securing a policy as quickly as possible is wise.
How much does private flood insurance cost?
Your flood insurance quote will depend on multiple factors, such as your house’s location and level of flood risk, your desired policy limits and whether you go with the NFIP or a private company.
Your house’s flood zone is critical in determining your flood insurance quote. Mortgage lenders use FEMA’s flood insurance rate maps (or FIRM) to calculate flood insurance requirements when entering a lending agreement.
To better understand your property’s flood risk, enter your address at the Flood Map Service Center.
Average cost of flood insurance by zone
| Zone Type | Category | Average Annual Rate |
|---|---|---|
| A | High-risk inland areas or “Special Flood Hazard Area” | $1,251 |
| V | High-risk coastal areas | $9,190 |
| D | Possible but undetermined flood risk | $2,983 |
| X | Low-to-moderate flood zones | $1,975 |
Source: FEMA
A and V zones have a 1 in 4 chance of flooding in a 30-year period, while low-to-moderate flood zones, such as X zones, have a reduced but not unreal chance of a flood. And yet, according to FEMA, floods can happen anywhere.
Note that your rate could go up or down once any area is classified in a definite flood zone.
Private flood insurance companies to consider
According to the Insurance Information Institute’s most recent data, American International Group (AIG), Zurich Insurance Group and Assurant are the leading companies providing private flood insurance policies.
Largest private flood insurance companies by market share
| Company | Market Share |
|---|---|
| AIG | 14% |
| Zurich Insurance Group | 11.9% |
| Assurant | 9.7% |
| AXA | 9.4% |
| Berkshire Hathaway | 8.2% |
| Swiss Re Ltd | 5.9% |
| Sompo | 5.7% |
| Liberty Mutual | 5.7% |
| Chubb | 3.9% |
| Allstate | 3.6% |
Source: Insurance Information Institute
Frequently asked questions
If you live in a high-risk flood zone, your property manager or mortgage lender will likely require you to purchase flood insurance.
Another instance where flood insurance is mandatory is if you receive federal disaster assistance. This includes FEMA grants and U.S. Small Business Administration (SBA) loans.
Even if you don’t live in a high-risk zone, look at the flood history in your area and consider getting disaster insurance. According to FEMA, 25% of all flood insurance claims come from low-to-moderate-risk flood zones, and they receive one-third of disaster assistance due to flooding.
If your property is exposed to flooding, NFIP policies won’t cover the following:
- Landscaping
- Septic systems
- Decks and patios
- Fences
- Hot tubs
- Swimming pools
- Currency, precious metals, stock certificates
- Cars
- Personal property stored in basements
- Financial losses due to business interruption
In comparison, some private flood companies will provide additional coverage, such as personal property damaged in basements.
Additionally, private companies typically offer “loss of use” coverage, which can help cover housing and living expenses while you wait for your home to be repaired or rebuilt.