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Return To: Flood Insurance – The Ultimate Guide
Being in a flood zone isn’t the only reason to get flood insurance. You might even need it.
In the United States, the Federal Emergency Management Agency (FEMA) classifies flood areas according to risk. About a fifth of all flood insurance claims do not come from high-risk areas. Rather, they come from low-risk areas.
Knowing this, you may be better off preparing for a flood. Flood insurance is key, but which insurance should you get?
In the United States, you can get two types of flood damage insurance. You can opt for a plan provided by the private sector or by the National Flood Insurance Program (NFIP).
Private flood insurance and NFIP flood insurance can cover your losses after a flood. In this article, you will learn the differences between the two.
What Is the National Flood Insurance Program (NFIP)?
The NFIP is a federally-backed flood insurance program. Its overseeing agency is the Federal Emergency Management Agency, the agency responsible for disbursing claims.
NFIP flood insurance covers damages to homes. It also provides coverage for property losses within homes or buildings after a flood. There is currently a coverage cap as well as a waiting period before a beneficiary can make a claim.
NFIP History
The NFIP has been around for about five decades. Congress launched it sometime in the late 60s to involve communities in flood prevention and protection.
In the years before 1968, Congress observed the concurrence of floods and the need for flood insurance. This observation led to the passing of the National Flood Insurance Act of 1968. As one of its key provisions, a federally financed flood insurance program became a must.
The Act led to the creation of the National Flood Insurance Program. Since its inception, it has aimed to provide flood damage coverage to beneficiaries. As time went on, the insurance program added community involvement in flood prevention as a goal.
Its other aims include:
- Floodplain management
- The classification of areas based on flood risk
A long-standing alternative to other types of insurance, the NFIP would change.
July 6, 2012 saw the passing of the Biggert-Waters Flood Insurance Act. The Act was aimed at the financial sustainability of the NFIP through policy rate increases.
The Act passed into law meant that NFIP policies became more costly. No backlash became apparent until 2014.
In 2014, Congress and FEMA enacted the Homeowner Flood Insurance Affordability Act. The signing of this act into law resulted in:
- Protection from future policy rate hikes
- A reduction in rates for some of the NFIP’s policyholders
The reductions benefitted policyholders. The same cannot be said of the NFIP and FEMA.
Since 2014, FEMA and the NFIP have given policyholders large payouts on claims. The large amounts in total dealt FEMA and the NFIP a huge financial blow. For this reason, the years leading up to 2016 consisted of reinsurance to spread costs and payouts.
NFIP Flood Insurance Program
Before getting into the NFIP, you may want to revisit what FEMA considers a flood. According to FEMA, a flood is an overflow of water on a surface. The surface also needs to be dry on average and be about two acres wide at least.
Why is it crucial to know this? It is because the NFIP only covers damages caused by floods. Any water damage that cannot be attributed to a flood is not part of the coverage.
NFIP flood insurance provides two types of insurance coverage. First, NFIP flood insurance covers house and building damage post-flood. Any damaged part of the home will receive coverage. Second, the contents of a house or building are also subject to the NFIP’s coverage.
This table will give you examples of damages you can claim:
| Building Damages Include | Content Damages or Losses Include: |
| Any built-in appliance | Any personal belongings |
| Light fixtures | Appliances that are not fixed or built-in |
| Cabinets, closets, cupboards | Rugs or carpets |
| Walls | Valuable possessions like sculptures and paintings |
| Staircases and fire exits | Television sets |
| Built-in thermoregulation appliances like furnaces, boilers, and air conditioners | Any portable electronic equipment |
One other feature of NFIP flood insurance is the coverage cap. In most cases, claimants are the owners of houses or small buildings. The maximum coverage you can claim as a homeowner is about $250,000. Coverage can go up to $500,000, but this is for commercial buildings. As for the contents, you can claim up to $100,000 worth of damages.
What Is Private Flood Insurance?
For the longest time, the NFIP was the only flood insurance plan you could get in the United States. As time went on, flood insurance grew into an industry with the introduction of private players.
FEMA’s NFIP flood insurance plan can be a viable option for you unless you desire broader coverage and a higher coverage cap.
If this sounds like the flood insurance plan for you, consider private flood insurance. Like the NFIP, it offers the same coverage for building and content damage.
Besides the basic coverage, it has other types of coverage. Also, you have options when it comes to your insurance provider.
Private Flood Insurance Companies List
The private flood insurance industry has grown since its resurgence after the 1970s. Today, many companies act as flood insurance providers. The list keeps on growing.
Below is a list of some prominent private flood insurance companies.
- Zurich Residential Private Flood Insurance
- Floor Guard Insurance
- TypTap Flood Insurance
- GEICO
- Assurant
- MetLife
- Better Flood Insurance
These and other private companies offer varying rates, coverage caps, and additional coverage types.
How Does Private Flood Insurance Work?
Private flood insurance works similarly with the NFIP. Its basic coverage includes buildings and contents. The major differences lie in a few areas.
First of all, most if not all private companies offer higher coverage limits. For instance, with Floorguard, you can claim up to $5,000,000 in coverage. This amount is $4,750,000 more than the NFIP!
TypeTap provides its beneficiaries up to $500,000 in building coverage, twice as high as the NFIP. This makes TypTap an ideal addition to your NFIP flood insurance if you have it.
Private flood insurance companies also have coverage types not present in FEMA’s NFIP. These coverage types are:
- Replacement cost reimbursement for contents
- Reimbursements for items that have lost their functionality
Unlike the NFIP, you can pay private companies in installments. You can also forget about the one-month waiting period the NFIP requires!
Private Flood Insurance vs. FEMA’s NFIP: The Choice May Be Obvious
Private flood insurance and the NFIP have covered flood victims in the United States for a very long time. Indeed, the NFIP has proven to be a reliable federally-backed solution to flood damages. Private flood insurance companies add additional layers of coverage and protection with other perks to boot.
So, which one do you choose? If you own property priced below $250,000, the NFIP will suffice. If you need a higher coverage cap with other coverage add-ons, look no further than private flood insurance.
Here at ALLCHOICE Insurance, we provide competitive flood insurance rates and coverage. If you are worried about flood damage, give us a call!