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If you live in a high-risk zone, called a “Special Flood Hazard Area”, and you have a mortgage on your home, you’re probably required to have a flood insurance policy. On the other hand, if you live in a moderate or low-risk area, flood insurance isn’t mandatory, but, no one is immune from such disasters. Having flood insurance is the only way to protect your investment in your home from a flood.

Instead of getting your flood insurance by going through FEMA’s National Flood Insurance Program, you can choose a cheaper Private Market Flood insurance policy through several of the highly rated insurance companies we represent.

While less expensive, a private flood policy covers as much as a FEMA National Flood Insurance Policy. The key differences are that you can get lower premium rates, higher and additional coverages, and an elevation certificate is not necessarily required.

What is Private Market Flood Insurance?

A private market flood insurance policy is basically a flood policy underwritten by a private insurance company that’s an alternative to a FEMA National Flood Insurance Policy.

Following Hurricane Katrina and then Superstorm Sandy, FEMA’s flood insurance program NFIP is tremendously in debt, running a deficit of at least $24 billion, and the financial burden is transferring to its policyholders.

Private flood insurance comes into play with an assortment of different private insurance companies entering the flood insurance marketplace. As rates increase within the NFIP, the demand for additional flood insurance options followed. Making private market flood insurance a hot topic among many homeowners.

Compared to the NFIP, Private Market Flood insurance can offer higher coverage than $250,000 without an Excess Flood Insurance policy.

What are the pros and cons of private market flood insurance?

Higher building and personal property limits
Shorter waiting period, approximately 14-15 days
Cheaper if the property has little history of flooding
Elevation Certificate is not required
Replacement Cost loss settlement on building
and personal property
Enhanced coverage in basements
Ordinance and law coverage
Broader coverage for other structures
Additional living expenses for homeowners &
business income expenses for commercial
Optional Food Spoilage coverage and/or
swimming pool clean-up coverage
FlexCash option – a one-time payout of up to $10K
for unexpected expenses (offered by Assurant)
Mortgage lenders may be reluctant to accept it or completely decline it
Steep rate increase if you return to a NFIP policy
You might lose certain hazard mitigation
grant programs from FEMA
There is no guarantee of policy renewal
Policy could be canceled or non-renewed mid-term
for reasons allowed by state statutes
Coverage may not be as broad as NFIP policies
You can lose an NFIP subsidized rate and/or
grandfathering when switching to a private insurer
The carrier might leave the market and non-renew
all the policies
The policy could contain unique conditions
and exclusions
Surplus lines carriers who offer private flood
insurance coverage have no state guaranty fund
The insurer may be weakly capitalized or
new to writing flood coverage

Is a Private Market Flood insurance policy right for me?

Even if private flood insurance provokes fear among homeowners and insurance agents, there are steps that you can take to make sure that you are making the right decision when getting an alternative flood insurance policy.

Investigate the financial condition of the insurance company thoroughly in order to avoid future problems in case of a claim, and read your policy carefully to find what coverage is included and what the exclusions are.

Feel free to ask our experienced agents about the pros and cons of both the NFIP and the Private Market Flood Insurance options.