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

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. 

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]

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?

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

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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]

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%

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