What is Private Flood Insurance?

This is flood insurance that is both written and funded by private insurance companies. While private flood insurance only makes up a tiny fraction of the market, it’s become an increasingly popular — and occasionally cheaper — alternative to the NFIP. 

  • Private Flood Insurance covers your home and belongings from damage caused by outside flooding. But what makes it different from FEMA flood insurance is that policies aren’t backed by the federal government. The insurance company is responsible for managing its own risk and paying out claims.
  • While it only accounts for around 5% of the residential flood insurance market, the number of people turning to private flood insurance instead of the government program appears to be on the upswing. In fact, private flood insurance premiums grew 71% from 2016 to 2018, and 15 states experienced over 100% growth in premiums during that span. [2]

There are a Couple of Reasons Why Private Flood Insurance
is Becoming More Popular

Insurance companies no longer view flood insurance as an untouchable risk. Company models for determining the flood risk of each home are more sophisticated, and the third-party firms in charge of creating these models are getting better at predicting floods. This has incentivized more investment in private flood insurance, and as a result, companies are expanding and pouring more resources into new markets.

It’s important to note that FEMA is over $20 billion in debt. The unpredictability of the government program has both insurance policymakers and policyholders searching for another answer.