Flooding is one of the most common natural disasters in the US. Because so many areas have the potential for flooding, and because of the breadth and extent of flooding disasters, homeowners insurance typically excludes coverage for damage caused by flooding.
This means that homeowners must purchase separate policies for flood insurance. For many years, the default option for flood insurance coverage has been the government-backed National Flood Insurance Program.
In recent years, more private insurers have entered the market with flood insurance policies that offer more coverage options than government-backed policies can provide.
What is flood insurance?
Flooding is defined by waters that rise and enter the living structure from outside at ground level. Homeowners sometimes misunderstand their policies, thinking that because things like burst pipes are covered, that all damage done by water is covered—which is incorrect.
Flood insurance must be purchased separately from a standard homeowners or renters insurance policy. Specialized flood insurance policies do cover damage caused by rising flood waters—but there are limitations.
Who needs flood insurance?
Homeowners who live in areas that are likely to flood are often required by their mortgage lender to carry flood insurance.
Flooding is becoming more common for a variety of reasons. Even urban areas that aren’t near rivers have experienced floods when heavy rains overwhelm drainage system capacity. Coastal areas, rivers, streams—all of these can quickly see waters rise. Even mountainous areas are at risk—North Carolina experienced devastating flooding in the wake of Hurricane Helene.
Because floods damage wide areas and flooding is becoming more common, many more homeowners would benefit by carrying flood insurance even if they are not required to by their lender.
How does the National Flood Insurance Program work?
The National Flood Insurance Program (NFIP) is a government-run program that is part of the Federal Emergency Management Agency (FEMA).
The NFIP works with insurers to provide flood insurance to business and residential property owners and renters. Communities can participate in the NFIP if they meet requirements established by the program to improve flood resilience.
Participation in the NFIP allows those who reside in a community to access affordable flood insurance.
There are some limits and restrictions to government flood insurance that homeowners should be aware of when shopping for a flood insurance policy. The most important restriction to be aware of is coverage limitations. The maximum coverage for a home is $250,000 for the structure and a $100,000 maximum on personal property.
While this might be sufficient coverage in some areas, in other regions it will cost far more to rebuild a home—which means federal flood insurance may leave homeowners severely underinsured.
Is private flood insurance better than government options?
Government flood insurance options are typically affordable, and available in areas that are considered higher-risk. Government-backed insurance policies typically offer stable premiums, and unlike private insurers, you are unlikely to have your policy dropped if flooding risks increase.
There are some downsides that homeowners should know about before they purchase an NFIP-backed policy.
The primary limiting factor of government flood insurance options is coverage limits, but that isn’t the only concern. Because flooding typically impacts large areas, claims processing through government programs can take a long time.
Private flood insurance can be a better option than the NFIP for some homeowners, particularly those with higher-value homes and those living in high-cost areas, where it is more expensive to rebuild.
What are the benefits of private flood insurance?
Private flood insurance offers benefits that address some of the complaints about government-backed flood insurance policies.
With higher coverage limits, private flood insurance can be a better choice for homeowners with higher-value properties or those who live in areas where it is expensive to rebuild, and those who need more coverage for their belongings.
Private flood insurance typically offers more options for coverage, too. Homeowners can choose to add options like temporary living expenses coverage, which can help pay for lodging if your home is unlivable after a flood while it is being repaired.
What are the costs associated with private flood insurance?
The cost of private flood insurance will vary depending on where you live, what the risk level of flooding is, and how much coverage you choose.
Because private flood insurance offers more flexibility and higher coverage levels, homeowners should anticipate paying more for a private flood insurance policy than an NFIP-backed policy would cost.
Can you have both private and government flood insurance?
Yes, you can have both an NFIP flood policy and private flood insurance—in fact, this is how some homeowners choose to address coverage gaps left by NFIP policies.
Talk to your insurance agent about how having two policies would work if your home experiences a flood. It is important for homeowners to understand how multiple policies would work to cover a home.
Is private flood insurance available in all states?
As of this writing, flood insurance is not available in all states. However, it is widely available and most homeowners interested in securing a private flood insurance policy should be able to find coverage options.
How can I switch from government to private flood insurance?
Homeowners interested in switching their flood insurance from an NFIP-backed policy to private flood insurance should contact either their insurance agent or talk to the experts at Rate Insurance. Carefully consider what switching means—particularly in an area that presents a higher risk for flooding, as you may pay more if you ever have to switch back to the NFIP.
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