If you’re considering homeownership or renting in an area where flooding is a common concern, you might have heard a lot about excess flood insurance and want to know if it’s something that you need for your home.
There are certain areas of the United States that are particularly susceptible to home damage due to flooding, so people looking to purchase a home need to consider their options and understand the difference between flood insurance and excess flood insurance policies. Often, mortgage lenders will also require borrowers to have particular types of policies.
Understanding Excess Flood Insurance
Many people who have flood insurance have public policies that are issued by the government’s National Flood Insurance Program (NFIP). This program exists to provide affordable insurance to people whose homes are located in areas that are at a certain level of risk of flooding damage.
If you’re looking to purchase a home and the previous owners were covered under NFIP, that home is in an area at risk of flooding. NFIP policies are only offered to people living in areas that have been determined to need coverage by the Federal Emergency Management Agency (FEMA).
It’s important to know that NFIP policies have a maximum limit of coverage that might be too low to meet your flood insurance needs. If your home would cost more than $250,000 to rebuild, you will have a gap in your coverage if you only have an NFIP policy.
That’s where an excess flood insurance policy comes in. The rest of the coverage you would need to protect your home can be purchased in an additional policy from a private insurer that would supplement your NFIP coverage.
In order to decide what kind of flood insurance coverage to look for, first, you have to understand what excess flood insurance coverage costs in comparison to government NFIP coverage, as well as what other options you might have.
What Does Excess Flood Insurance Cover?
People who get excess flood insurance have homes whose value exceeds the 250,000 amount covered by NFIP plans and need to get a private plan that covers the rest of their property value. Additionally, NFIP plans include personal property coverage of up to 100,000, and you may need supplemental property coverage, too.
When choosing privately insured excess flood insurance coverage, there are no legal maximums to policy coverage set, so you can choose a plan that covers both the cost of rebuilding your home and the value of your personal property.
With the combination of public and private insurance coverage, you’ll know that you have the right amount of protection in case flooding damages your home and your personal property.
How Much Does Excess Flood Insurance Cost?
Prices for similar coverage can vary between private insurers, so it’s critical that you compare options in your area in order to find the right combination of coverage and price for your needs.
General estimates/examples of both NFIP coverage and private excess flood coverage in different areas in the U.S. can give you a ballpark figure to work with, but if your coverage needs are significantly higher than the NFIP amounts, you would be best served by specific quotes from potential insurers in your area.
Another aspect of considering private excess flood insurance is that its prices are controlled the way that NFIP rates are. Unlike with privacy policies, government plans for areas at risk for flood each have locked-in rates and premiums for insurees to keep the coverage affordable.
What Other Options Are There?
For people living in homes or with personal property that greatly exceed the NFIP maximum coverage amounts, there is another option to consider: a single, completely private flood insurance policy.
NFIP policies are intended to make living in high-risk flooding areas more affordable, but if you need significant coverage for flood damage, there are some advantages of having a single policy including:
- Only having to maintain one policy, bill or claim in the event of damage
- Shorter waiting periods for payout on a claim
- Cheaper price for a single policy rather than two
These are all components that you should consider when shopping for comprehensive flood insurance that meets your individual needs, but keep in mind that, while NFIP insurance policy cannot be nonrenewed for high risk, there’s no such guarantee for a private policy.
If you’re considering this option, make sure to do your due diligence and compare several completely private policies as well as different combinations of NFIP coverage with supplemental excess flood insurance.
Choosing What Kind of Flood Insurance to Purchase
Talk to your lender as well as insurers in your area to find out what options are available to you. There are pros and cons to choosing dual insurance policies versus a single privately insured policy, but the most essential aspect is that your home and belongings are covered so you and your family can have the assurance you can to rebuild your home in case flooding affects you.
