NFIP Risk Rating 2.0 vs. Private Flood Insurance
Updated: Jun 21
No one likes to be locked into a monopoly for services. For many years, that is how the NFIP operated.
If you are not familiar with the NFIP (National Flood Insurance Program), it is a government program for flood insurance which is administered by FEMA (Federal Emergency Management Agency). For decades, if you wanted flood insurance, the NFIP was your only option. Consumers were locked into NFIP pricing and coverages.
But now, consumers have more options like private flood insurance. Private flood insurance is offered by organizations who are backed by major carriers with strong financial ratings. They saw the shortcomings of the NFIP and created programs that regularly offer better rates and more coverage options than the government program. For example, CATcoverage.com began offering the National Catastrophe Insurance Program (NCIP) flood insurance more than 17 years ago, and continues to enhance their offerings.
Private flood insurance offered through companies like FloodPrice, helped change the competitive environment for consumers and forced the NFIP to adjust their rating system to be more like the private market. The result is FEMA’s new program, entitled Risk Rating 2.0.
What Makes Private Flood Insurance Different than the NFIP Risk Rating 2.0?
Additional Living Expenses
The NFIP does not offer the option of additional living expense. In contrast, most private flood insurance policies offer the option to purchase additional living expense. Additional living expense coverage can help pay for many of the expenses that you may incur due to flood damage, like meals at restaurants, hotel bills and a number of other expenses that could arise while your home is being repaired or rebuilt.
Rebuild Limitations
The NFIP has coverage limits that are often lower than private flood insurance for both residential and commercial properties. The maximum coverage amount for residential dwelling coverage with the NFIP is $250,000, and the coverage limit is $500,000 for commercial buildings. This means that your home or business could be underinsured with the NFIP and this could make you liable for damages that exceed these limits. Private flood insurance typically has higher coverage limits, with as much as $4,000,000 for residential dwelling and for commercial buildings.
Contents Coverage
If your home experiences damage from a flood, you will want to make sure that your personal belongings are covered. The NFIP has a maximum coverage amount of $100,000 for residential contents, while private flood insurance typically offers limits up to $500,000.
The NFIP Can Hold You Hostage
The NFIP offers NO mid-term cancellations. This means that once your policy renews, you have no option to cancel it unless you meet very restrictive guidelines, such as the sale of your home. The process can be difficult and frustrating. Here is a link to the guidelines to cancel an NFIP policy mid-term: FEMA Cancellation Form.
Private flood insurance makes the process to cancel a policy mid-term much easier. At FloodPrice, we don’t want you to leave us, but we won’t hold you hostage.
A Straightforward Side-by-Side Comparison
Let's Compare | NFIP | |
Compliant with State Insurance Laws | Yes | No |
Maximum Residential Building Coverage Amount | $4,000,000 | $250,000 |
Maximum Content Coverage Amount | $500,000 | $100,000 |
Additional Coverage Options Available** | Additional Living Expenses, Debris Removal & Carports | None |
Basement Coverage Available* | Paint, Flooring, Baseboards, Personal Property and more. | Drywall (no tape or mud) |
Additional Fees Required for Coverage of More Than One Structure | No | Yes |
Waiting Period for Policy Inception | 15 Days | 30 Days |
*To see exactly what is covered by the NFIP, and what's not, see Page 9. **Limited Coverage may be available for detached garage.
FloodPrice Can Help You Find the Right Fit
Purchasing flood insurance can be a difficult and confusing process, and FloodPrice is here to help. This means we will try to find a tailor-made policy to fit your needs. We can compare private flood insurance against the NFIP to make sure you get the right coverage for the right price. Get a no obligation flood insurance quote from us today and find out how easy the process can be. You can even get a quote and purchase your policy online in minutes!
