NFIP vs Private Flood Insurance

Both the NFIP and private flood insurance can satisfy the federal mandatory purchase requirement for properties in Special Flood Hazard Areas. Since 2019, federal legislation requires lenders to accept qualifying private flood insurance policies, removing a major barrier that previously kept most homeowners on the NFIP.

• High-risk properties: For properties with very high flood risk, the NFIP may offer more affordable rates than private carriers. Private insurers may decline to write coverage or charge significantly more for properties in the highest-risk areas.
• Continuous coverage history: If you have maintained an NFIP policy for many years, you may benefit from transition provisions under Risk Rating 2.0 that cap annual premium increases. Canceling to go private and later returning could mean losing these protections.
• Universal availability: The NFIP is available in all participating communities regardless of risk level. Private carriers may not write policies in certain high-risk areas or may exit a market after significant losses.
• Certainty of lender acceptance: While most lenders now accept private flood insurance, the NFIP is universally accepted without question. If you want to avoid any potential lender issues, the NFIP is the safest choice.

• Lower-risk properties: Private carriers often offer competitive rates for properties with favorable risk characteristics, particularly those in moderate or low-risk zones, elevated above BFE, or far from water sources.
• Higher coverage needs: If your home is worth more than $250,000 or your contents exceed $100,000, the NFIP caps may leave you underinsured. Private carriers can offer higher limits to fully cover your property.
• Additional coverages: Many private policies include loss of use (additional living expenses if you cannot stay in your home), basement contents coverage, and other benefits that the standard NFIP policy does not provide.
• Shorter waiting period: Private policies often have a 10-15 day waiting period compared to the NFIP's 30 days. This can be helpful if you need coverage to start sooner, though it still cannot be purchased retroactively.