What's the Difference Between Private Flood Insurance and FEMA Flood Insurance?

If you're looking for flood insurance, you have many options, ranging from private insurers to government programs. There were few options for homeowners to purchase flood insurance in the past, and they primarily relied on policies written by the National Flood Insurance Program (NFIP) through FEMA. However, with the advent of private insurers, homeowners can now obtain lower-cost policies—but the grass isn't always greener on the other side. There are advantages and disadvantages to purchasing through the government or private insurers, so let's go over what you need to know about the distinction between private flood insurance and FEMA flood insurance.

What exactly is FEMA flood insurance?

FEMA manages the National Flood Insurance Program (NFIP). It provides flood insurance policies to homeowners through a network of 50 carriers and the NFIP Direct. Congress created the program in 1968 to assist residents of high-risk flood zones. The NFIP provides up to $250K in property damage coverage and an additional $100K in contents coverage.

What is the definition of private flood insurance?

Private flood insurance refers to flood insurance provided by private insurance companies rather than through FEMA's NFIP program. Flood insurance policies typically provide more comprehensive coverage limits than NFIP policies and additional benefits such as loss-of-use coverage, depending on your insurer.

FEMA vs. Private Flood Insurance

There are several distinctions between private flood insurance policies and NFIP policies, but the most important distinction is policy stability. Private insurers have the right to cancel policies at renewal, leaving you without coverage and looking for a new policy. Since NFIP policies cannot be canceled, you have lifelong coverage as long as you pay your premium. On the other hand, private flood insurers typically provide more benefits, such as loss-of-use coverage or more coverage in general.

What kind of flood insurance should I get?

Buying insurance is difficult, but the best way to buy flood insurance (or any insurance for that matter) is to assess your current situation and shop around for the best coverage and price. You should ask yourself the following questions:

Do I require increased claim limits? If the value of your home and personal property exceeds what the NFIP provides, a private insurer is likely your best bet.

What advantages do I seek? Is there somewhere else you and your family can live if something bad happens to your house and you have to leave while repairs are made?