Florida homeowners historically had few options when it came to flood insurance. The National Flood Insurance Program (NFIP) is expensive, restrictive, and often a last resort option.
With nearly 3.5 million people at risk for coastal flooding in Florida, and only about half the folks in high-risk flood areas equipped with flood insurance, something had to change. Fortunately, private flood insurance is becoming more readily available. Here’s what you should know about the NFIP, private flood insurance, and how private flood insurance may benefit you – and your budget.
Why the National Flood Insurance Program (NFIP) isn’t enough
The National Flood Insurance Act of 1968 created the NFIP, which is managed by the Federal Emergency Management System (FEMA). The program was the result of too few private flood insurance carriers and an increase in federal assistance for flood disasters. The program’s goals are threefold:
- Provide flood insurance.
- Improve floodplain management.
- Map flood hazard zones.
The NFIP has more than 5.1 million policies in force, but providing flood insurance to homeowners was never one of its goals. Its primary aim was to improve floodplain management and mapping, and to that end, the program has been successful.
The NFIP maps flood zones based on historical data to predict 100-year flood risk. That doesn’t mean a flood will only happen every 100 years in a given area. It means according to historical data, there is a 1 percent chance of a major flood occurring, but floods can (and do) happen more frequently.
Here’s how the NFIP categorizes flood zones and their risks.
|B & X (shaded)||Area of moderate flood hazard, usually the area between the limits of the 100‐ year and 500‐year floods. B Zones are also used to designate base floodplains of lesser hazards, such as areas protected by levees from 100‐year flood, or shallow flooding areas with average depths of less than one foot or drainage areas less than 1 square mile.|
|C & X (unshaded)||Area of minimal flood hazard, usually depicted on FIRMs as above the 500‐year flood level. Zone C may have ponding and local drainage problems that don’t warrant a detailed study or designation as base floodplain. Zone X is the area determined to be outside the 500‐year flood and protected by levee from 100‐year flood.|
|A||Areas with a 1% annual chance of flooding and a 26% chance of flooding over the life of a 30‐year mortgage. Because detailed analyses are not performed for such areas; no depths or base flood elevations are shown within these zones.|
|AE||The base floodplain where base flood elevations are provided. AE Zones are now used on new format FIRMs instead of A1‐A30 Zones.|
|A1 - 30||These are known as numbered A Zones (e.g., A7 or A14). This is the base floodplain where the FIRM shows a BFE (old format).|
|AH||Areas with a 1% annual chance of shallow flooding, usually in the form of a pond, with an average depth ranging from 1 to 3 feet. These areas have a 26% chance of flooding over the life of a 30‐year mortgage. Base flood elevations derived from detailed analyses are shown at selected intervals within these zones.|
|AO||River or stream flood hazard areas, and areas with a 1% or greater chance of shallow flooding each year, usually in the form of sheet flow, with an average depth ranging from 1 to 3 feet. These areas have a 26% chance of flooding over the life of a 30‐year mortgage. Average flood depths derived from detailed analyses are shown within these zones.|
|AR||Areas with a temporarily increased flood risk due to the building or restoration of a flood control system (such as a levee or a dam). Mandatory flood insurance purchase requirements will apply, but rates will not exceed the rates for unnumbered A zones if the structure is built or restored in compliance with Zone AR floodplain management regulations.|
|A99||Areas with a 1% annual chance of flooding that will be protected by a Federal flood control system where construction has reached specified legal requirements. No depths or base flood elevations are shown within these zones.|
|V||Coastal areas with a 1% or greater chance of flooding and an additional hazard associated with storm waves. These areas have a 26% chance of flooding over the life of a 30‐year mortgage. No base flood elevations are shown within these zones.|
|VE, V1 - 30||Coastal areas with a 1% or greater chance of flooding and an additional hazard associated with storm waves. These areas have a 26% chance of flooding over the life of a 30‐year mortgage. Base flood elevations derived from detailed analyses are shown at selected intervals within these zones.|
|D||Areas with possible but undetermined flood hazards. No flood hazard analysis has been conducted. Flood insurance rates are commensurate with the uncertainty of the flood risk.|
The rating system the NFIP created made it easier for private flood insurance companies to accurately price coverage based on the home’s proximity to water, elevation, and other hazards. But its coverage was not enough.
Limitations of the NFIP policy
While the NFIP has kept many homeowners from being completely uninsured for floods, its coverage is often too limited for the needs of most homeowners. For starters:
- Coverage doesn’t start until 30 days after the application is accepted by NFIP.
- Dwelling limits are capped at $250,000 regardless of the home’s actual rebuild cost (the average rebuild cost in the US is between $108,768 and $457,876).
- Contents coverage is limited to $100,000 regardless of how much personal property you have.
- Deductibles start at $1,000, and your personal property and dwelling have separate deductibles.
Dissatisfaction wasn’t enough to pave the way for private flood insurers to enter the market, though. It took some regulatory changes to really put those gears in motion.
The rise of private flood insurance
What took so long for private insurance to come along?
The issue was twofold: floods are hard to predict, and federal regulations prevented private insurers from offering flood coverage to homes with federally regulated mortgages.
Private insurers were slow to enter the market because there wasn’t a reliable way to measure flood risk. In recent years, they’ve developed sophisticated models to help predict, underwrite, and rate flood risk.
Federally regulated lenders also couldn’t accept private flood insurance for homes in certain flood zones that are required to have flood coverage. It took until 2019 for federal regulators to make it possible for these lenders to accept private flood insurance. The caveat is the coverage must be comparable to NFIP policies or better.
Regulators decided to ease regulations in the hopes of helping people get affordable coverage so they don’t have to supplement with federal aid after natural disasters. After Hurricane Harvey, 738,000 people registered with FEMA for assistance, and it paid out $378 million for flood damage.
So far, it seems capitalism is working for consumers.
How private flood insurers are improving flood insurance
After decades of floods besieging US coastal communities, 120 private flood insurers have stepped up to offer flood insurance as of 2018. In Florida, 31 private flood insurance companies cover homes.
Private flood insurers are helping drive down insurance costs in a couple key ways:
- More competition in the flood insurance market helps reduce costs.
- More insurers helps spread out the economic risk so one insurer or program isn’t saddled with all the claims.
Private flood coverage may cost as little as $500 a year for Florida homeowners, depending on their flood zone. If more people have flood insurance, it furthers drives down costs for everyone – another benefit of making the coverage affordable.
Compare that to NFIP premiums, which vary drastically. The chart below shows average premium based on elevation, deductible, and property characteristics.
*Base flood elevation. Source: RFF.org
The benefits of private flood insurance
Because standard home insurance policies don’t offer flood coverage, private flood insurance allows Florida homeowners to safeguard their homes and fill this gap in their coverage.
And if you work with us, we make it super easy to add flood insurance to your policy as an endorsement so you pay one premium and one deductible for both your home and flood insurance. Taking on an NFIP policy means you have to pay two premiums for the two separate policies (one for your home insurance, one for flood).
Some additional perks of our flood insurance:
- Increased dwelling protection: Unlike the NFIP limit of $250,000, Kin policies match the coverage of your homeowners dwelling coverage.
- No waiting period: Our coverage is effective immediately.
- No elevation certificate: We don’t require an elevation certificate, but you can submit one for a better discount.
- No separate flood deductible: Your AOP deductible applies to flood claims.
- Seasonal home coverage: We don’t charge extra for flood insurance for a vacation home, unlike the NFIP.
Getting flood protection has never been easier. Get a quote today.