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What is the difference between Private Flood Insurance vs NFIP Coverage (FEMA)? Believe it or not, the Private Market Flood insurance policy has the exact same coverage as the the National Flood Insurance Program policy – but it is not available in all locations and has other limitations.

Private Flood Insurance vs NFIP Coverage (FEMA)

The devastating flooding that occurred as a result of several significant hurricanes in 2018 has lead to a surge in the amount of inquiries about flood insurance.

Namely, many homeowners and businesses have been wondering if there are differences between Private Flood Insurance vs NFIP Coverage (FEMA)? So what are the differences are between the National Flood Insurance Program policy and the Private Market Flood insurance policy?

About The National Flood Insurance Program (NFIP)

The National Flood Insurance Program (NFIP) was established in 1968. This program was created in response to the increasing number of private flood insurers that stopped providing coverage to homeowners because of the massive losses they suffered when those they insured filed claims. Flood damage can cost an insurance company a tremendous amount of money, and quite frankly, insurance companies that offered flood coverage didn’t want to sustain those losses.

In order to obtain a mortgage for a home located in an area that’s prone to flooding, flood insurance is mandatory. As such, when private insurers stopped writing coverage for flooding, the real estate market was severely impacted. Buyers, realtors, and lenders all suffered. To resolve the issue, the government stepped in and created a subsidized insurance option – the National Flood Insurance Program.

The NFIP is offered by the Federal Emergency Management Administration (FEMA). NFIP implemented the Write Your Own program in 1983, which made it possible for private insurance companies to offer flood insurance using the rates and regulations set forth by the NFIP. Today, some well-known insurance companies operate under NFIP’s Write Your Own program, including the Hartford and Travelers.

How NFIP Works

Private Flood Insurance vs NFIP Coverage (FEMA). The NFIP makes it possible for property owners who live in participating communities to purchase insurance that safeguards them against losses that are associated with flooding. This type of insurance is meant to be used as an alternative to flood assistance; it brings down the cost of repairing flood damage. Homeowners are allowed to buy additional flood insurance, but they have to be covered by National Flood Insurance Program insurance first.

NFIP insurance safeguards homeowners who live in areas that are prone to flooding, but there are coverage as well as offering limits. For example, there is a 30-day waiting period in order to receive assistance for damages under the NFIP.

About Private Market Flood Insurance

Private Flood Insurance vs NFIP Coverage (FEMA). Property insurance companies have started offering private flood insurance again, as they are looking for ways to increase their revenue. The flood insurance these private providers offer does have advantages, which makes it rather enticing for homeowners. These benefits include:

  • Higher coverage limits than the limits that are provided by the NFIP.
  • Settlements for replacement costs on building and personal property losses.
  • More coverage for basements.
  • Broader coverage for other structures, in addition to the home.
  • More coverage for living expenses.
  • Lower deductibles.
  • The potential for lower rates.

Despite the benefits of private flood insurance, there are some disadvantages, which may include:

  • The coverage may not be as broad as the coverage offered through NFIP.
  • Unlike the NFIP, there aren’t any guarantees for renewals. Through the NFIP, policies must be renewed if the premiums are paid.
  • Some lenders are very reluctant to accept private flood insurance policies, or they may completely deny them.
  • Policies can be cancelled, whereas NFIP coverage cannot be cancelled.
  • Rates can drastically increase.
  • There could be significant exclusions and conditions associated with the policy.

Private Flood Insurance Or NFIP: Which Is Better?

Many homeowners and businesses that are not required to do so by a mortgage company choose not buy flood insurance – because it is expensive and can be difficult to purchase. Private Flood insurance may be a good choice to consider for homes in both higher risk flood zones (A* zones) and lower risk areas (B, C, and X zones).

 Private Flood MarketNFIP (FEMA)
Underwriting Questions1260
Elevation Certificate RequiredNoYes *
Max Building Limit$750,000$250,000
Waiting Period15 days30 days
Lender AcceptedYesYes

One of the best features of a Private Flood insurance policy is that no ‘elevation certificate’ is required (these can cost upwards $1,000).

Private Flood Insurance vs NFIP Coverage (FEMA). Given the guarantees that the NFIP offers, many homeowners would say that this is the better insurance coverage option for flooding. However, the long waiting periods and the lengthy list of requirements that homeowners must abide by can make it a bit cumbersome. Therefore, some homeowners may be more inclined to purchase private flood insurance, especially if a policy offers less exclusions and broader coverage.

Private Flood Insurance vs NFIP Coverage (FEMA) – The Bottom Line

We hope this article on Private Flood Insurance vs NFIP Coverage (FEMA) was informative. There are advantages and disadvantages associated with both types of flood insurance. If you are interested in purchasing a home that is located in an area that is prone to flooding, speak to a reputable insurance company. They can guide you through the process of selecting the best flood insurance coverage and ensure that the structure of your home and your personal property are properly protected against flood damage.

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