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Excess Flood Insurance Explained

Updated: Nov 10, 2020

Excess flood insurance is just what it sounds like – extra coverage to protect against the peril of flood. For many, FEMA’s National Flood Insurance Program has been a go-to for flood insurance. Unfortunately, the program is not only saddled with problems related to inaccurate risk ratings and poor claims service, it only offers homeowners a maximum of $250,000 of residential building coverage. While this may be sufficient for some, if your home is worth more than the payout limit, your NFIP policy is not going to make you whole – or even close to it in many cases – after a major flood.

That said, the federal government only requires homeowners to purchase flood coverage up to the maximum amount available through the NFIP ($250,000) or the total of their mortgage (whichever is less), regardless of the value of the home. Many homeowners will look to the private insurance market for excess flood insurance to supplement their NFIP coverage by up to $2 million.

You see, excess flood insurance is not available through the federal government. Property owners must go through private insurance companies to supplement their NFIP polices. Excess flood insurance can offer the same structural coverage provided by the NFIP, but to limits far above the NFIP’s $250,000 – basic coverage to repair or replace the structure. Excess flood coverage kicks in after a flood claim exhausts the government’s $250,000 in coverage. While it may sound simple enough, with the wrong providers, this can create complications not only in terms of purchasing flood insurance, but in filing claims when two policies are involved.

It is wise for homeowners to seek excess flood insurance to ensure their coverage matches the value of their home, but there is an alternative to buying an excess flood policy. Many private flood insurers can provide homeowners with all the coverage they need in one place.

In fact, some private flood policies provide significantly more coverage than an NFIP policy. Private flood policies, sold on their own or as an excess policy, can provide coverage for multiple buildings, additional living expenses, basement contents and debris removal. This coverage can make a real difference for property owners after a catastrophic event.

Buying flood insurance can be complicated, but it doesn’t have to be. Informed homeowners who understand the limits they need, and the coverages they want, should be able to find comprehensive coverage at an affordable price without much difficulty. While coverage can be secured above the NFIP’s $250,000 limit with excess flood insurance, savvy property owners should consider a conveniently packaged private flood insurance policy where all their flood insurance needs can be met in one place.

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