Private flood insurance vs. NFIP: Which is better?

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 HowardPat HowardManaging Editor & Licensed Home Insurance ExpertPat 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.&Kara McGinleyKara McGinleySenior Editor & Licensed Home Insurance ExpertKara McGinley is a former senior editor and licensed home insurance expert at Policygenius, where she specialized in homeowners and renters insurance. As a journalist and as an insurance expert, her work and insights have been featured in Forbes Advisor, Kiplinger, Lifehacker, MSN, WRAL.com, and elsewhere.

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Jennifer GimbelJennifer GimbelSenior Managing Editor & Home Insurance ExpertJennifer Gimbel is a senior managing editor and home insurance expert at Policygenius, where she oversees our homeowners insurance coverage. Previously, she was the managing editor at Finder.com and a content strategist at Babble.com.
Expert reviewedExpert reviewedThis article has been reviewed by a licensed Policygenius expert to ensure that sources, statistics, and claims meet our standard for accurate and unbiased advice.Learn more about oureditorial review process.

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Ian Bloom, CFP®, RLP®Ian Bloom, CFP®, RLP®Certified Financial PlannerIan 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. 

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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

Best private flood insurance companies

Our picks for the best private flood insurance companies offer a mix of affordable rates, flexible policy options and coverage limits, high financial strength ratings, and industry-best customer service.

  • Neptune: As a private flood insurance marketplace, Neptune is our top pick overall thanks to the comprehensive coverages offered by the large mix of carriers it partners with. Through Neptune, you have access to up to $4 million in building coverage, up to $500,000 in personal property coverage, and up to $10,000 in coverage for belongings stored in your basement — rare among flood insurance companies.

  • Wright: Boasting the cheapest rates of all of the major flood insurance companies we looked at, Wright is a great choice for affordable coverage if you live in one of the 40 states it works in. Depending on the insurer you're connected with, you may be able to get up to $1.25 million in building coverage and $875,000 in personal property coverage.

  • Kin: This relatively new insurance company with innovative underwriting and risk modeling technology is our top pick for Florida and Louisiana homeowners looking to roll their home insurance and flood coverage in one. It offers a private flood insurance endorsement you can add on to your standard home insurance policy for an additional premium to save you both time and money.

  • Chubb: Our top pick for private flood insurance for high-value homes, Chubb flood policies include up to $15 million in building and personal property coverage, as well as up to $15,000 in coverage for belongings stored in your basement. Your home needs to be valued at more than $1 million to qualify for coverage, however, and it only works with homeowners in 41 states and Washington, D.C.

  • Palomar: If you're looking for additional flood insurance coverage to supplement your NFIP policy, Palomar is our top pick. The insurer offers up to $5 million in building coverage and $1 million in personal property coverage for homeowners who need an extra bit of coverage on top of their existing NFIP policy. However, you'll need to live in one of the 18 states it works in to qualify.

Learn more >> Best flood insurance companies of 2023

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

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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]

Find the average cost of flood insurance in your state in 2023

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 will vary 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?

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Case study: What it's like filing an NFIP flood insurance claim

We spoke to one homeowner who filed an NFIP flood insurance claim after Hurricane Sandy about his experience with the NFIP, and the changes FEMA has made since to prevent the issues brought on by the historic storm.

Maurice Gallagher and his wife owned and lived in a five-bedroom duplex near the Great Egg Harbor Bay in Ocean City, New Jersey, in late October of 2012 when Hurricane Sandy threatened the New Jersey coastline. 

After the storm hit, Gallagher, and many of his neighbors, called their flood insurance company. “It ended up being about three feet to three-and-a-half feet of water that got inside. I called my flood insurance company over the phone. I had to contact my homeowners insurance company too because I had roof damage.

Why he had to file two insurance claims

Flood insurance only covers flood damage, but homeowners insurance can cover lots of other types of damage, including wind damage, which is why Gallagher had to file two separate claims — one with his flood insurance provider for the flooding, and one with his homeowners insurance for everything else.

“I’ve had flood insurance since the day I bought the house,” Maurice explained, “Through the government.” Because Gallagher lived in a high-risk flood zone along the Atlantic coast, he was eligible for coverage through the NFIP. Luckily for Gallagher his home wasn't left uninhabitable. Since the NFIP doesn't offer loss-of-use coverage (unlike private flood insurance) he would've had to foot the bill himself to live elsewhere while his home was being repaired.

How long it took to get his NFIP claim payout

Gallagher eventually received a claim payout, but it took months. After Hurricane Sandy, the NFIP had a backlog of flood insurance claims, resulting in New Jersey’s Congressional delegation sending a letter to FEMA after South Jersey residents hadn’t received their payouts three months after hurricane originally hit. [6]

The hardships that homeowners faced after Hurricane Sandy even led lawmakers and advocates to reconsider how the government handles flood claims and flood zoning to prevent such delays from happening again. [7]

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Frequently asked questions

Is private flood insurance better than NFIP?

Private flood insurance is better than NFIP coverage in that it offers more robust coverage, higher coverage limits, and a shorter waiting period for your policy to take effect. But it may be hard to find coverage through a private insurer if you live in a high-risk flood zone, which is when you might want to consider NFIP coverage that's available nationwide.

How can you get private flood insurance?

You can buy private flood insurance by reaching out to an insurance company that offers flood coverage. But an easier option is to use an insurance marketplace like Policygenius. Our team of licensed insurance agents can help you find a private flood insurance policy that meets your needs and ensures your home is fully protected. Even better, we'll give you quotes from multiple companies so you can rest easy knowing you got the best deal possible at the lowest price. You can learn more with our guide to buying flood insurance.

Who is eligible for private flood insurance?

Anyone is eligible for private flood insurance. That being said, it might be harder to find coverage if you live in a high-risk flood zone since private insurance companies might not want to take on the risk. If that's the case, consider purchasing a policy through the NFIP. While they have lower coverage limits, they write policies nationwide for homes in all types of flood zones.

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.

  6. Insurance Journal

    . "

    N.J. Congressional Delegation Expresses Concern Over NFIP Claims

    ." Accessed July 08, 2022.

  7. FEMA

    . "

    Sandy Recovery Improvement Act of 2013

    ." Accessed July 08, 2022.

Authors

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.

Kara McGinley is a former senior editor and licensed home insurance expert at Policygenius, where she specialized in homeowners and renters insurance. As a journalist and as an insurance expert, her work and insights have been featured in Forbes Advisor, Kiplinger, Lifehacker, MSN, WRAL.com, and elsewhere.

Editor

Jennifer Gimbel is a senior managing editor and home insurance expert at Policygenius, where she oversees our homeowners insurance coverage. Previously, she was the managing editor at Finder.com and a content strategist at Babble.com.

Expert reviewer

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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