Floridas Private Flood Insurance Market

Over the last 50 years, homeowners in Florida that needed a flood insurance policy had only one real options, purchasing coverage from the federal National Flood Insurance Program (NFIP). Florida residents were a big supporter of the NFIP, accounting for over a third of the policies being sold.

However, due to changing flood maps, more homeowners have found themselves in a need of flood insurance and while the NFIP has been struggling for years dues to huge losses, the private market for flood insurance has been growing in the Sunshine State.  

“It’s growing rapidly,” said Mark Friedlander, Florida representative for industry group the Insurance Information Institute said in a recent Tampa Bay Times article. “The private flood insurers see this as a very viable market for growth.”

Data from the Florida Office of Insurance Regulation shows that Florida currently has roughly 83,000 private flood insurance policies as of September 2019. This is a huge leap from 2015 when there were fewer than 1,000 private flood insurance policies in the market. Despite the increase, private insurance is still relatively rare in Florida, there were 

1.76 million NFIP residential and commercial flood insurance in force in Florida in 2018.

Difference Between NFIP and Private Policies

There are a few differences between a NFIP policy, and one purchased in the private market. Here is a quick breakdown:

• Coverage Levels: This is a major difference, under the NFIP, a homeowner can only purchase $250,000 in dwelling coverage and $100,000 in personal property protection. In the private market, there are no coverage caps, you can purchase as much insurance as your insurer is willing to sell you. Many homeowners have a NFIP policy up to coverage limits and supplement that with a private market policy up to their value of their home. 

• Risk Levels: Another big difference is the way risk is measured. NFIP policies determine a home’s risk by looking at what “flood zone” it falls into. Flood zones are geographic areas lumped together based on their likelihood of flooding. These zones can encompass an entire neighborhood and not look at the specifics of the home.

Private market policies on the other hand look at the specifics of the home and not the surrounding area to determine risk which can result in dramatic premium differences. “The differences can be significant,” said James Watje, senior vice president of private flood for Wright National Flood Insurance Services in the Tampa Bay times article. 

The government is currently in the processing of moving to a new risk model program that follows private insurer methods, hopefully the closing the gap in premium costs. 

Other Differences: The other differences between the two are more subtle. Private flood insurance policies can offer coverage for additional structures on your property such as a shed, barn, pool house or even a gazebo while the NFIP requires separate policies for each of those items and in some cases may not offer protection at all. 

In addition, private market policies can be replacement cost which means they will replace your personal possessions with a new one regardless of cost, a NFIP policy on the other hand is a actual cash value policy which takes deprecation into account when determining the value of your property. 

While more private insurers are a welcome sight in the Florida insurance market, there can be costs to switching back and forth between a NFIP and private market policy. Many NFIP policyholders receive a subsidized rate on their policy that increases slightly each year. If they make the move to a private market policy and later want to switch back to an NFIP policy, they may lose that subsidized rate and ended up paying the market rate which can be significantly higher. 

If you are searching for better home insurance rates in Florida, then click here to easily shop and compare the best Florida home insurance rate quotes. Or speak to a licensed Florida insurance agent, give us a call at 888-685-4704. We look forward to helping you with your home and flood insurance policy!