What is the difference between private flood insurance and the NFIP?

Private flood insurance is a good alternative to the NFIP, offering higher levels of coverage for your home and belongings — sometimes at cheaper rates.

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Pat Howard

Pat Howard

Managing Editor & Licensed Home Insurance Expert

Pat Howard is a managing editor and licensed home insurance expert at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.

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Ian Bloom, CFP®, RLP®

Ian Bloom, CFP®, RLP®

Certified Financial Planner

Ian Bloom, CFP®, RLP®, is a certified financial planner and a member of the Financial Review Council at Policygenius. Previously, he was a financial advisor at MetLife and MassMutual.

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A standard homeowners insurance policy covers certain types of water damage, but it won’t pay for damage from natural flooding. For that reason, mortgage lenders often require separate flood insurance for homes in special flood hazard areas

There are two main ways to get flood insurance: 

  • National Flood Insurance Program (NFIP): The NFIP is the main flood insurance provider in the U.S., accounting for the vast majority of residential flood policies nationwide. [1] The policies are written and backed by the Federal Emergency Management Agency (FEMA), but sold by private insurance companies.

  • Private flood insurance: This is flood insurance that is both written and funded by private insurance companies. While private flood insurance only makes up a tiny fraction of the market, it’s become an increasingly popular — and occasionally cheaper — alternative to the NFIP. 

Additionally, private flood insurance tends to have a wider array of coverage options and higher limits of protection than the NFIP plan. 

Compare rates and shop affordable flood insurance today

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The NFIP is set to expire on September 30, 2022

Congress must reauthorize the NFIP every few years. Currently, the NFIP is set to expire on September 30, 2022 at midnight, unless congress reauthorizes it. Congress has never failed to renew the NFIP before. If they don't, FEMA will still honor claims, but will stop selling flood insurance and renewing policies.

With the uncertainty surrounding the NFIP and its ability to exist long term, homeowners may want to consider private flood insurance that's provided and backed by private companies.

Learn more >> The best flood insurance companies in the U.S.

What is private flood insurance?

Private flood insurance covers your home and belongings from damage caused by outside flooding. But what makes it different from FEMA flood insurance is that policies aren’t backed by the federal government. The insurance company is responsible for managing its own risk and paying out claims.  

While it only accounts for around 5% of the residential flood insurance market, the number of people turning to private flood insurance instead of the government program appears to be on the upswing. In fact, private flood insurance premiums grew 71% from 2016 to 2018, and 15 states experienced over 100% growth in premiums during that span. [2]

There are a couple of reasons for why private flood insurance is becoming more popular

Insurance companies no longer view flood insurance as an untouchable risk. Company models for determining the flood risk of each home are more sophisticated, and the third-party firms in charge of creating these models are getting better at predicting floods. This has incentivized more investment in private flood insurance, and as a result, companies are expanding and pouring more resources into new markets.

It’s important to note that FEMA is over $20 billion in debt. The unpredictability of the government program has both insurance policymakers and policyholders searching for another answer.

Learn more >> Flood insurance facts and statistics

What is the National Flood Insurance Program?

The NFIP was established by the federal government in the late 1960s to provide flood insurance and establish floodplain standards in communities across the country. Around 90% of residential flood insurance in the U.S. is provided by the NFIP

Policies are primarily sold through its Write Your Own (WYO) program to residents who live in an NFIP-participating community. The WYO program basically allows private insurance companies to write and service government flood insurance using their own name and branding. In fact, you can generally purchase NFIP coverage from your home insurance provider.

FEMA flood insurance includes two types of coverage with their own separate out-of-pocket deductible.

  • Building property coverage: Pays to repair flood damage to your home or garage. The maximum building coverage limits for residential property is $250,000, which is often too low for more expensive homes. 

  • Personal property coverage: Pays to repair or replace flood damaged furniture, electronics, appliances, and other stuff you own. The maximum personal property coverage limit is $100,000. 

Until recently, if you had a federally-backed mortgage and you lived in a high-risk flood zone, your mortgage company could require you to buy flood insurance exclusively through the NFIP. But as of July 1, 2019, lenders are required to accept private flood insurance as long as the policy includes at least the same quality coverage as the NFIP option.

Learn more >> How much flood insurance do you need?

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Private flood insurance vs. NFIP: Which is better?

Since private flood insurance isn’t subject to the same restrictions and regulations as government flood coverage, insurers are able to offer coverage options not available through the NFIP. This includes payments for temporary living expenses — like hotel stays and restaurant meals — and coverage for personal belongings in your basement. 

Private flood insurance also often offers higher protection limits for your home and belongings, and policy enhancements like replacement cost personal property coverage, limiting your out-of-pocket expenses after a flood loss.  

NFIP

Private flood insurance

Maximum home rebuild limit

$250,000

Typically up to $500,000 or higher

Availability

Participating communities in all 50 states

May be limited in higher-risk areas

Waiting period

30 days

As little as two weeks

Accepted by mortgage lenders

Yes

Yes

Replacement cost building coverage

Yes

Yes

Replacement cost contents coverage

No

Yes

Loss of use coverage

No

Yes

Loss avoidance coverage (sandbags, etc)

No

Yes

Debris removal coverage

Yes

Yes

Additionally, private flood insurance has a shorter waiting period, which is the amount of time it takes for your policy to take effect after you’re approved for coverage. This makes it a preferred option during hurricane season for residents who need coverage right away. 

But there are some downsides to private flood insurance as well. You typically have to pay a higher out-of-pocket deductible on claims, and your policy can be canceled or nonrenewed if your insurer thinks your home is too high risk. With NFIP flood insurance, you generally don’t have to worry about getting dropped from your policy.

But if you feel you’re being charged too much for NFIP coverage or you’re interested in higher coverage limits for your house and belongings, it may be worth turning to private flood insurance instead. In fact, a 2017 study by Milliman found that 77% of single-family homes in Florida, 69% in Louisiana, and 92% in Texas could all see cheaper premiums with private flood insurance. [3]

Find the average cost of flood insurance in your state in 2022

Compare private flood insurance & NFIP rates

The average annual cost of NFIP flood insurance is $738, while private flood insurance costs around $1,074 per year, according to our 2022 analysis of flood insurance pricing data from FEMA and the National Association of Insurance Commissioners. [4] [5] But your own rates may vary greatly depending on factors like your home's flood zone, elevation, and how much flood insurance you need.

Here's the average annual cost of flood insurance from 17 private flood insurance companies and how each company's rate compares to the NFIP.

Company

Average annual cost

Difference from NFIP average

AIG

$2,264

207%

American National

$766

4%

Assurant

$713

-3%

Bankers Insurance

$214

-71%

Chubb

$2,698

266%

National Fire & Marine Insurance

$3,054

314%

National General

$1,136

54%

Centauri Insurance

$657

-11%

Neptune

$749

2%

Palomar

$732

-1%

Steadfast Insurance

$519

-30%

The Flood Insurance Agency

$2,355

219%

Trisura

$739

0%

TypTap

$1,621

120%

United Speciality Insurance

$845

15%

Vave

$1,093

48%

Wright Flood

$470

-36%

Learn more >> What is the average cost of flood insurance?

Compare rates and shop affordable flood insurance today

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References

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Policygenius uses external sources, including government data, industry studies, and reputable news organizations to supplement proprietary marketplace data and internal expertise. Learn more about how we use and vet external sources as part of our

editorial standards.
  1. University of Pennsylvania Wharton School of Risk Management

    . "

    An Overview of the National Flood Insurance Program in Washington, DC

    ." Accessed September 19, 2022.

  2. National Association of Insurance Commissioners

    . "

    Considerations for state insurance regulators in building the private flood insurance market

    ." Accessed January 07, 2022.

  3. Milliman

    . "

    Could private flood insurance be cheaper than the NFIP?

    ." Accessed January 07, 2022.

  4. National Association of Insurance Commissioners

    . "

    Private Flood Insurance Data Collection

    ." Accessed September 19, 2022.

  5. Federal Emergency Management Agency

    . "

    Flood Insurance Data and Analytics

    ." Accessed September 21, 2022.

Author

Managing Editor & Licensed Home Insurance Expert

Pat Howard

Managing Editor & Licensed Home Insurance Expert

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Pat Howard is a managing editor and licensed home insurance expert at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.

Expert reviewer

Certified Financial Planner

Ian Bloom, CFP®, RLP®

Certified Financial Planner

gray twitter icon linkgray linkedin icon link

Ian Bloom, CFP®, RLP®, is a certified financial planner and a member of the Financial Review Council at Policygenius. Previously, he was a financial advisor at MetLife and MassMutual.

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