Better Flood


Is private flood insurance better than NFIP / FEMA, aka the government option?

If you are wondering if private flood is better than FEMA flood insurance and are interested in a comparison, you have come to the right spot. As a Flood Nerd™, we have some ideas of which is better, depending on the circumstance or preference. For most of our clients, however, it comes down to price. The NFIP/FEMA or government policy is often more expensive for less coverage than many private flood options.

One thing to note is that the FEMA policy has had a near monopoly on flood insurance for fifty years, so they set the standard. Some private flood policies use the same policy parameters that the NFIP established and just offer a cheaper product. We flood nerds call this the “Me too” and are not our ideal. We want more for our clients.

However, many of our clients don’t care about the coverage. They just want the price, and if we don’t service this minimum need, we don’t have a chance to help you get your coverage. If coverage is more important to you, please let us know so we can shop. With that in mind, you will be one of the few.

The Government option also has a cap of $250,000 for building and $100,000 for contents, which might not be enough coverage for your needs.

Many private flood policies have a loss of use, and the government flood policy doesn’t

A few private flood policies will pay out replacement costs on claims for primary and secondary homes. Government policy only pays replacement costs on primary homes.

Some private flood policies will allow you to get replacement costs on contents. The FEMA policy will only pay out on ACV (aka depreciation).

Some private flood policies offer coverage for other structures. The FEMA policy only allows a detached garage if there is no living area above and the garage is only used for parking vehicles. It will need its policy if you use it as a workshop/storage or anything else.

The NFIP has had a half-a-century hold on the flood insurance market, and they have a lot of data, but they will not release the public on flooding or flooding events.

Private flood policies sometimes have a less waiting period before a policy becomes active, usually 10 to 14 days. At the same time, the NFIP has a 30-day wait before your new policy can effect.

The Risk rating 2.0 that the NFIP instituted in October 2021 has lowered some property premiums, so it is a good idea to ask a Flood Nerd to shop for you. We shop both the NFIP and many private flood options to ensure you have a competitive edge in saving your money.

The NFIP would not allow mid-term cancellations unless you sold your home. So this means if you have a much better option with the private market, you will have to wait until your FEMA policy is renewed to switch.

The NFIP basically ignores that there is a private flood market (denial much?). If you find that you are getting a better deal with the government policy, you will have to account for the 30-day wait they will put you on. You don’t want your policy to lapse or not have coverage. If you move from the government policy to the NFIP, the private market will allow you to pick up the new coverage on the NFIP expiration date.

All private flood options you are offered through the Flood Nerds comply with each state’s laws. If you are using an agent that doesn’t know flood, rethink because you might be in trouble if the policy does not comply. The disturbing thing here is that the NFIP policy (even though it was the only option for 50 years) still doesn’t comply with many of your state’s laws.

Come on!

Flood Nerds know flood insurance is all we do. We can help you find the right policy for your unique property and needs. Flood Insurance is confusing and worse; many agents selling clients’ policies don’t know what they are doing, which could cause you much pain if you need to access the policy for a claim. We shop both the NFIP and the many options on the private flood insurance market and then offer you the one with great coverage at a competitive cost.

The NFIP is over their head (even though they had such a lock on the product). This has caused the program to be $20+ billion in debt. They were able to get the bailout our government is so willing to do. Otherwise, the program would likely be at the $80 billion mark.

The NFIP still has the lion’s share of the flood insurance market, but we are working on helping people save money. When writing this blog post, they still had 90% of the residential flood market.

If you currently have a flood insurance policy, let us help you find a better one or at least discover if the one you have is competitive.

United States law says that if your loan is federally-backed and you live in a high-risk flood zone, your mortgage company must require you to buy a flood insurance policy or buy one for you. Until 2019 your lender could choose to accept the private flood policies.

Sadly a few clueless lenders didn’t understand or accept flood insurance written through a private flood insurance policy. Today all lenders accept private flood insurance that the flood nerds get.

There is one exception if your loan is FHA, then your only option is the NFIP which is so fricken unfair because we have had options for clients that were around $500, and because of their loan type, they had to pay $2,500 for the government flood coverage. Ask your elected officials to change this unfair practice.

The only downside we have found for the private flood insurance market is that the deductibles are sometimes higher than the NFIP. As a flood nerd, this is best practice since lower deductibles tend to have people turn in small claims and any flood claim is a mark on your property which can cause a denial of coverage or higher premiums.

You must understand that catastrophic insurance (flood, fire, & earthquake) should only be activated in a catastrophe and not when your shed gets a little water due to poor planning when placing the shed.

You may find other writings listing State Farm, Farmers, Allstate, Liberty Mutual, Geico, USAA, and Farm Bureau. These are private companies, but they do not offer private flood insurance. They can only get the NFIP or government option, and then they just put their logo on it, making it seem like they are offering the coverage.

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