Is Private Flood Insurance Right for You?

The National Flood Insurance Program may not offer as much coverage as private flood insurance companies.


Since the 1970s, almost all flood insurance in the U.S. has come from the National Flood Insurance Program, which is backed by the government. However, you may now have other options. More and more private flood insurance companies are starting to offer coverage that may be cheaper or more complete than what you can get through the NFIP.


Here’s what you need to know about private flood insurance, as well as a few companies to think about.
 
First, though, a word about terminology: NFIP policies are sold by companies like Allstate and Farmers. “Private flood insurance” refers to policies that aren’t backed by the federal government and don’t have the same rules as those backed by it.


The NFIP vs. private flood insurance


Private flood insurance is a small but growing part of how flood insurance is handled in the United States. According to data from the Federal Emergency Management Agency, the total premiums for the NFIP in the fiscal year 2021 were more than $3.5 billion.


The Insurance Information Institute says that only $302 million in premiums were paid by private flood insurers in 2020, the most recent year for which data is available.


But just because the NFIP has a big share of the market doesn’t mean it’s the best choice for everyone. For example, the most the program will cover is $250,000 for your home’s structure and $100,000 for your things. If you have a big house or a lot of expensive things, these amounts might not be enough.
 
Compare these limits to what a private insurer like Neptune will cover, which is up to $4 million for your house and up to $500,000 for your belongings.
 
An NFIP policy won’t pay to fix a damaged swimming pool or replace things stored in your basement. It also won’t pay for you to stay in a hotel or rental while your home is being fixed after a flood. But you might be able to get this kind of coverage from a private flood insurance company.


Surplus line carriers are the ones who back up some private flood insurance policies. These are insurance companies that cover things that most insurance companies won’t. The government regulates and keeps an eye on surplus line carriers to make sure they stay in business.
 
But, unlike standard or “admitted” insurance companies, surplus lines carriers don’t have to pay into a state’s guaranty fund. If an admitted insurance company goes out of business, a guarantee fund will pay policyholders’ claims. If an insurance company that covers “surplus lines” goes out of business, you won’t have the same protection.


Still not sure if you should get private flood insurance? Here are some things to think about.


Pros of buying your flood insurance


Policies from private companies usually have higher coverage limits than the maximums set by the NFIP, and they often cover a wider range of things.
 
Most of the time, the waiting period is shorter than the 30-day federal window.
 
Some homeowners may save money by getting private flood insurance.


 
Cons of private flood insurance


Mortgage lenders may sometimes turn down private flood insurance and make you get a federal policy instead.
 
If you drop your NFIP insurance and get private coverage, you might have to pay a lot more to get back into the NFIP.
 
Some private companies won’t cover all kinds of properties for insurance. Mobile homes, houseboats, and properties that have recently flooded are often not allowed.
 
The federal government backs NFIP policies, which could make them safer than those from a private company that could go out of business.


Private flood insurance companies


Here are a few private flood insurance companies that are easy to find and may be able to cover your home. Remember that these are just the beginning. An independent insurance agent in your area might be able to help you find other options.


 
Edge Aon


The EZ Flood policy from Aon Edge covers your home’s structure for up to $1.25 million and your personal belongings for up to $875,000. You can also add coverage for cleaning up your swimming pool, replacing spoiled food, and paying for living expenses if you have to move while repairs are made. If you buy your policy as part of a loan closing, you don’t have to wait 15 days.
 
The company says that, compared to NFIP coverage, it saves policyholders an average of 40%. Some agencies sell EZ Flood insurance all over the United States, except in Alaska, Hawaii, Kentucky, and Washington, D.C.


 
Chubb


Because Chubb focuses on protecting expensive homes, its flood insurance policies go far beyond what the NFIP offers. You can insure your home’s structure and contents for up to $15 million, and the company will also pay for damage to your personal belongings and built-in items in your basement. Extra living costs, if you have to move temporarily, and debris removal up to $250,000 are also covered.
 
If you are at risk of flooding, Chubb will pay up to $5,000 for things you do to protect your home, like moving valuable items out or putting sandbags around the foundation. In 38 states and Washington, D.C., Chubb sells flood insurance.

Neptune Flood


Neptune has a nice website where you can get a quote for flood insurance in just a few minutes. It is available in Washington, D.C., and every state except Alaska and Kentucky. Neptune’s flood insurance covers things that an NFIP policy doesn’t, like damage to things in your basement, pool refills, and extra costs if you have to stay in a hotel while your home is being fixed.
It also has much higher coverage limits than the NFIP, with up to $4 million for your home’s structure and $500,000 for its contents. The coverage starts 10 days after you buy the policy, or right away if you buy it at the same time as a mortgage.


Private Market Flood


The Flood Insurance Agency sells private market flood insurance. The agency also sells NFIP policies. The policies are almost the same, but the agency’s private flood insurance policy covers up to $500,000 for the building and up to $250,000 for the contents. Depending on the situation, the waiting time can be anywhere from 0 to 14 days.

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