Flood Insurance: Legitimate Private Alternatives Exist

Private flood insurance is an alternative to the government-backed National Flood Insurance Program (NFIP). Private flood insurance policies are usually more flexible and can offer better protection than NFIP flood insurance. Private flood insurance companies may offer higher coverage limits than the NFIP. However, private flood insurance can be risky because insurance companies can increase your rates or drop you, while rates through the government are more stable.

Private flood insurance vs. NFIP

Private flood insurance is an alternative to the government-backed National Flood Insurance Program (NFIP). It is provided by private companies rather than the federal government and offers more flexibility and broader coverage options. Private flood insurance can be a better deal than an NFIP policy because it can cover more expensive homes, provide better coverage, and give cheaper rates.

Here's a breakdown of the key differences between private flood insurance and NFIP:

Private Flood Insurance

• Provided by private companies
• More flexibility and broader coverage options
• Potentially higher coverage limits (up to $500,000 or more, depending on the insurer)
• Typically covers additional living expenses and loss of use
• Shorter waiting period for policy to take effect (usually one to two weeks)
• Often cheaper, especially for homes with a low or medium risk of flooding
• Rates may vary by company and can change each year
• Policy may be cancelled or non-renewed if the insurer thinks your home is too high-risk
• Claims are paid directly by the insurance company

NFIP Flood Insurance

• Administered and backed by the federal government
• Standardised coverage across the country
• Coverage limits of $250,000 for the structure of the home and $100,000 for belongings
• Does not cover additional living expenses or loss of use
• Longer waiting period of 30 days
• More stable rates, backed by the government
• Available nationwide, even in high-risk flood zones
• Claims are paid by the government

While private flood insurance offers more flexibility and coverage, there is a risk of higher rates or policy cancellation. On the other hand, NFIP provides standardised coverage with more stability but may not be sufficient for expensive homes or high-risk areas.

Pros of private flood insurance

Private flood insurance offers several advantages over the National Flood Insurance Program (NFIP). Here are some pros of private flood insurance:

Higher Coverage Limits

Private flood insurance companies typically offer higher coverage limits than the NFIP. While the NFIP has a maximum coverage limit of $250,000 for the structure of your home and $100,000 for your belongings, private insurers can provide much higher limits. For example, Neptune Flood offers coverage of up to $4 million for your home and $500,000 for your belongings. This makes private flood insurance a better option for those with large homes or expensive belongings.

Broader Range of Coverage

Private flood insurance often provides a broader range of coverage compared to the NFIP. It can cover additional living expenses, such as hotel stays and meals, if you need to temporarily relocate due to flood damage. Private flood insurance may also cover damage to items in your basement, swimming pool repairs, and other expenses not typically covered by the NFIP.

Faster Coverage

Private flood insurance usually has a shorter waiting period than the NFIP's 30-day federal window. For example, Neptune Flood's coverage takes effect within 10 days of purchasing the policy, or immediately if purchased with a mortgage. This makes private flood insurance a more attractive option for those who need coverage right away, especially during hurricane season.

Potentially Lower Costs

Private flood insurance may be cheaper for some homeowners, especially those in low- to medium-risk flood areas. Since private insurers set their own rates, you can shop around and compare rates to find the best deal. However, homes with a very high risk of flooding may find that NFIP rates are more competitive.

Cons of private flood insurance

Private flood insurance is an alternative to the government-backed National Flood Insurance Program (NFIP). While it can be a better deal than an NFIP policy, there are some cons to be aware of.

Rates are not consistent

How much you pay for private flood insurance can vary based on the company you choose. That's because each company will set your rates based on how risky they think your home is. Your rates can also change each year, so your costs could go up if you have to file a claim or there is a bad storm in your area.

You could lose coverage

A private flood insurance policy can cancel your policy or choose not to renew your policy if they think your property has become too risky. This is different from an NFIP policy, which will always give you coverage, no matter what.

Financial strength varies

Unlike government policies, claims for private flood insurance are paid by insurance companies. So you'll need to make sure you get a policy from a reputable company that will have enough money to pay out claims after a big disaster. Riskier properties may need a special type of private flood insurance called a surplus line or a non-admitted company. With these companies, you don't have the same kind of protection from state regulators if the company goes bankrupt.

You can't use FEMA's grant programs

When you have an NFIP policy, you may be eligible for grants that can help your home be more resistant to flood damage. These hazard mitigation grants usually aren't available when you have private flood insurance.

Rates could be higher if you go back to an NFIP policy

Some NFIP policies have subsidies that are automatically applied to rates, as long as you have continuous coverage. So you won't be eligible for these discounts if you switch back to an NFIP policy after having a private flood insurance policy.

Private flood insurance is less popular

Private flood insurance makes up less than a third of all flood insurance coverage, so it's not as popular as an NFIP policy. However, it's become much more common in recent years, and good policies are available from more companies.

Private flood insurance companies

Private flood insurance is an alternative to the government-backed National Flood Insurance Program (NFIP). Private flood insurance is legitimate and provided by private companies, instead of the government. Private flood insurance policies are usually more flexible and can give you better protection than NFIP flood insurance.

EZ Flood policy from Aon Edge

This policy covers your home's structure up to $1.25 million and your personal belongings up to $875,000. You can add coverage for swimming pool cleanup, spoiled food, and living expenses if you need to relocate during repairs. The company claims it saves policyholders an average of 40% over NFIP coverage and is available across the US except in Alaska, Hawaii, Kentucky, and Washington, D.C.

Chubb

Chubb specializes in coverage for high-end homes, and its flood insurance policies go beyond the NFIP's offerings. You can insure your home's structure and contents up to a combined total of $15 million, and the company will also pay for damage to personal possessions and built-in items in your basement. Policies include debris removal up to $250,000 and additional living expenses if you need to temporarily relocate. Chubb offers flood insurance in 38 states plus Washington, D.C.

Neptune Flood

Neptune offers a user-friendly website where you can get a flood insurance quote within a few minutes. Neptune's flood insurance can cover items an NFIP policy won't, including damage to items in your basement, swimming pool refills, and additional living expenses if you need to stay in a hotel while your home is repaired. Its coverage limits are also significantly higher than the NFIP's: up to $4 million for your home's structure and $500,000 for your belongings. Coverage takes effect 10 days after you buy the policy or immediately if you purchase it with a mortgage. Neptune is available in Washington, D.C., and every state except Alaska.

Private Market Flood

Private Market Flood insurance is sold by The Flood Insurance Agency, which also offers NFIP policies. The private flood insurance policy has higher coverage limits: up to $500,000 for the building and up to $250,000 for your belongings. The waiting period can range from zero to 14 days, depending on the circumstances. Private Market Flood policies are available nationwide, except in Kentucky, New York, Washington, D.C., and Florida's Monroe County.

Beyond Floods

Beyond Floods is offered through National General, an Allstate company. It offers up to $1.5 million in dwelling coverage and up to $750,000 in personal property coverage, making it suitable for many homes. They also offer add-ons to cover things like swimming pools, decks, and handicap ramps. Beyond Floods is only available in 33 states.

Private flood insurance vs. home insurance

Private flood insurance is an alternative to the government-backed National Flood Insurance Program (NFIP). Private flood insurance is provided and backed by private insurers, whereas the NFIP is backed by the federal government.

Coverage

Private flood insurance covers flood damage to your home and belongings. It is a separate policy from home insurance, which typically does not cover flood damage. Floods can happen anywhere, and just one inch of floodwater can cause up to $25,000 in damage.

Cost

The cost of private flood insurance varies depending on the company and the value of your home. On average, it costs $1,170 per year or $98 per month. In comparison, the average cost of an NFIP flood insurance policy is $859 per year.

Availability

Private flood insurance is available from some companies, while home insurance is more widely available. Private flood insurance is becoming more popular, but it still only makes up a small fraction of the flood insurance market.

Benefits

Private flood insurance can be more flexible and customizable than home insurance. It often offers higher coverage limits and broader protection for personal belongings. It may also be cheaper, especially for homes in low or medium-risk flood areas.

Waiting Period

Private flood insurance typically has a shorter waiting period than NFIP policies, which have a standard 30-day waiting period. Some private flood insurance companies have no waiting period or a one- or two-week waiting period.

In summary, private flood insurance can be a good option for those seeking more comprehensive coverage for their homes and belongings in the event of a flood. It may also be more cost-effective for certain homes, especially those in low or medium-risk flood areas. However, it is important to shop around and compare rates, as private flood insurance companies set their own rates and the cost can vary.

Frequently asked questions