How to Choose the Best Flood Insurance

Here’s how to choose between private flood insurance and National Flood Insurance Program coverage.
Most people get flood insurance through the National Flood Insurance Program, which is sold by companies like Allstate and Liberty Mutual that are approved by FEMA.
 
If you need higher limits or more coverage, the NFIP may not be the best flood insurance for you.
 
Flood insurance from private companies like Neptune Flood and Aon Edge is often more complete.
 
You want to buy flood insurance, but you don’t know where to start. You could go to one of the many companies that sell flood insurance through the National Flood Insurance Program. Private flood insurance from companies that are not part of the NFIP, on the other hand, maybe a better option. Here are four steps to finding the best flood insurance for your home.


Check what’s available


The National Flood Insurance Program, which is part of the Federal Emergency Management Agency, is the most common way to get flood insurance. The NFIP sells and manages its standard policy with the help of dozens of insurance companies approved by FEMA. These companies include some of the biggest insurance companies in the country.


You can get NFIP coverage as long as you live in one of the roughly 24,000 communities that are part of the program.
 
You might also be able to get your flood insurance instead of going through the government. NFIP policies are sold by companies like Farmers and USAA, but when we talk about “private flood insurance,” we mean policies that aren’t backed by the federal government or have to follow its rules.
 
You can find alternatives to the NFIP in your area with the help of a free agent or broker.


 
Determine your coverage needs


How much flood insurance you should buy and where you should buy it will depend on several things.


 
Mortgage lender’s requirements


If your mortgage requires you to get flood insurance, make sure you know how much coverage your lender wants. For instance, you might need to buy enough flood insurance to cover the loan’s remaining balance.
 
Keep in mind that the amount of coverage your lender wants may not be enough to protect your finances. Your bank might only require insurance for your home’s structure and not for your belongings. Could you afford to buy new ones if a flood destroyed all of your furniture? If you don’t have flood insurance, you might want to get it for your things. These things are sometimes called “personal property” or “contents.”


Limits on coverage


The most the NFIP will cover for your home is $250,000, and the most it will cover for your things is $100,000. If you have a big house, these limits might not be enough to rebuild the house or replace the things that were damaged in a big flood.


One way to fill the gap is with a type of extra insurance called “excess flood insurance.” Even though it works with NFIP plans, you have to buy extra flood insurance from a company like Wright Flood, Chubb, or Aon Edge. An independent insurance agent can help you find sellers in your area who you can trust.
 
You could also look into private flood insurance, which usually has higher limits of coverage than the NFIP.


 
What’s in it?


A few big things are left out of the standard NFIP policy. For example, you won’t get paid if you have to stay in a hotel while your flooded home is being fixed. Have a patio or pool? Even those aren’t taken care of.


What is covered by NFIP insurance?


Damage to the structure of your home, including the foundation, wiring, and plumbing.
Things like clothes, electronics, appliances, and furniture were broken.
Debris removal.
Art, furs, and other valuables worth up to $2,500 can be sold.


What the NFIP doesn’t pay for


Damage to things like fences, patios, and pools that are outside.
If you have to leave your home while it’s being fixed, you’ll have to pay for things like food and a hotel room.
Cars and trucks got hurt.
You’ve made changes to your basement, like putting down carpet and finishing the walls.
Things that are kept in the basement.


Some of the things that aren’t covered by the NFIP may be covered by private flood insurance.
Browse around.


If you can choose between the NFIP and private insurers, try to get quotes from both. (A broker or agent can help.) Keep in mind that all of the NFIP’s partner companies offer the same coverage and maximum payouts for flood insurance, so you don’t have to shop around with different FEMA-approved providers.
 
Try to compare policies with the same amount of coverage and deductibles so you can get the most accurate rate comparison. Still, you may find it worthwhile to pay more for a private flood insurance policy with higher limits or more coverage.


Choose the best company for flood insurance.


Here’s how to decide where to buy your policy once you’ve decided between the NFIP and a private insurer.


NFIP


Even though the prices of the NFIP’s partner companies are usually the same, you should buy your policy from one with a good reputation for customer satisfaction. NFIP policies are sold by at least six companies that NerdWallet has given at least 4 out of 5 stars.


You can also ask the insurance company you already have if it offers flood insurance. It might be easiest to buy all of your policies from the same company.

Flood insurance for private use


When choosing a private flood insurance company, you might want to be a little bit more careful. Private flood policies are not backed by the U.S. government like NFIP coverage is. Instead, they are issued by companies that could go out of business. You’ll need to do some research to make sure that the company you choose will still be in business when you need it.


Some private flood insurers are surplus line carriers, which means they take on risks that standard insurers won’t. They don’t have to pay into a state’s guaranty fund, which pays policyholders’ claims if a standard company goes out of business. So, if a big storm hits your area and your surplus line carrier can’t pay its claims because it doesn’t have enough money, you might not get the money you were expecting.
 
So, there are rules about surplus line carriers and the brokers who sell their policies. The National Association of Insurance Commissioners says that surplus line carriers don’t go out of business any more often than other companies.


Sites like AM Best and S&P Global let you find out how financially stable a company is. (You may need to sign up for free to see the ratings.) You can also look up reviews and news stories about a company to find out what other people have thought about it.

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