When it comes to flood insurance, it seems there’s a lot of confusion. ‘Doesn’t FEMA cover floods?’ ‘Doesn’t the federal government pay if I’m flooded?’ And if people even know about it, private flood insurance is often misconstrued as a program that’s subsidized by the federal government. That’s why we rounded up five of the most common questions we get about the government’s flood insurance program and private flood insurance. Hopefully these answers will help clear up any misconceptions.   

Q: What’s the main difference between NFIP and private flood insurance?
A: The NFIP is a federal government program administered by the Federal Emergency Management Agency (FEMA). Private flood insurance, on the other hand, is written by private insurance carriers who are free to offer as much coverage as they want. Carriers may also include additional coverages, such as additional living expenses, which are not offered by the NFIP.
 
Q: What is the biggest benefit of private flood insurance?
A: Private flood insurance is coverage with an insurance company as the risk taker meaning the company has ability to write its own policies and in some cases, offer broader coverage than the NFIP. While regulated, the private flood insurance market is not subject to the same terms and conditions as the NFIP.
 
Q: Doesn’t all flood insurance go through the NFIP anyway?
A: No. While the NFIP was the only market for flood insurance just a few years ago, that’s no longer the case. Several insurance carriers have entered the market as risk takers, many of whom offer higher limits, additional coverages, and sometimes lower rates. To get the most bang for your buck, ask your agent to shop around for the best coverage for your needs and your hard-earned dollar.
 
Q: Do lenders accept private flood insurance?
A: Yes, per the Biggert-Waters Act, requires institutions to accept private flood insurance that meets both the statutory definition and the mandatory purchase requirement. A final rule, FIL-8-2019, effective July 1, 2019, established the framework for institutions to evaluate whether a flood insurance policy meets the statutory definition of private flood insurance. Please note, FHA loans are an exception although a proposed rule released in late 2020 means change may be forthcoming.
 
Q: Is private flood insurance cheaper than the NFIP?
A: It depends. As with most insurance, there are a lot of factors that go into flood insurance rates including flood zone, elevation, distance to water, and more. Talk to your agent and ask them to shop around for the best rate, whether it be through the NFIP or a private insurance carrier.
 
 
This article is provided for general informational purposes only and is not intended to provide individualized advice.