What is private flood insurance?
Private flood insurance is sold directly to consumers by private insurance companies. As the name implies, it reimburses the policyholder for any covered flood damages to their property. You can purchase it to cover both residential and commercial properties.
Although direct sales weren’t common in the past because of the level of risk flood insurers take on, a report from the Congressional Research Service issued last year notes that new risk-assessment techniques have encouraged an increasing number of home insurers to enter the consumer flood-insurance market.
In fact, the number of net premiums written for private flood insurance nearly doubled from 2016 to 2021, according to the Insurance Information Institute (III), citing data from the National Association of Insurance Commissioners.
Private flood insurance policies, also known as “first dollar” or “primary flood insurance,” can offer higher coverage than NFIP policies, according to the III. They can also provide more types of coverage, such as additional living expenses and coverage without a waiting period.
The downside is that private flood insurance isn’t available in all areas and can sometimes be difficult to find. If your mortgage lender requires that you have flood insurance, you’ll need to make sure it meets the lender’s standards before buying a policy.
How much does private flood insurance cost?
The average annual cost of private flood insurance is $700 per year, according to FEMA. The rate you end up paying will depend on various factors, including the type of coverage, the location of your home, the age and design of your home, and whether the home is located in a high-risk area.
For example, consider the following policy quote for a property located in coastal Maryland in an AE zone, which is considered high-risk. The quote, from Neptune Flood Insurance, includes $300,000 of coverage for the structure, $100,000 of replacement-cost coverage for personal property stored inside the structure, and $7,500 in additional living costs. It costs $817 per year with a $1,000 deductible.
Excess flood insurance is a private-insurance option for some homeowners who have NFIP insurance but want to increase their coverage above NFIP limits.