Your New Flood Insurance Options

New Flood Insurance Options – Which one will you choose?

Hurricane season is here and if you don’t have a flood insurance policy in place, you may want to consider one. Flood damage is not covered by a standard homeowners policy and the majority of hurricanes bring severe flood damage with them when they come ashore.

In the past, the majority of flood insurance policies were written and backed by the National Flood Insurance Program (NFIP) but these policies require a 30-day waiting period to go into effect. This means that if you purchased a policy today, coverage will not kick in for 30 days, leaving you unprotected if a hurricane develops in that waiting period.

In addition, NFIP policies come with coverage limits that are often too low for many homeowners. However, in recent years, private insurers have moved back into the flood insurance market and it is now possible to purchase coverage in the private market that offers more robust coverage and in some cases the premium may be lower than a NFIP policy.

NFIP vs. Private Market Coverage

NFIP policies will provide dwelling coverage up to $250,000 and $100,000 in personal property coverage. If your home will cost more than $250,000 to rebuild you have no choice but to supplement your coverage with a private flood insurance policy.

NFIP premiums can vary dramatically with premiums for a low risk property running around $450 a year. High-risk properties can be significantly more expensive to insure with premiums running into the thousands of dollars. According to the NFIP, the average premium for a policy in 2018 is $1,062.

Private flood insurance on the other hand usually comes with much higher dwelling and content limits; you can often go as high as a standard homeowner policy. While there may be a waiting period for coverage to kick in, it is often 10 days or less. It should be noted that most private insurers will stop writing polices once a storm is named so it is never wise to wait to purchase a flood insurance policy.

Premiums will vary depending on a variety of factors but in many cases you can find a policy that is significantly cheaper than a NFIP policy.

It should be noted that private flood insurance options will vary by state. A study done by S&P Global Market Intelligence found that roughly 17 percent of all flood insurance premiums are private insurance policies. The biggest markets for private flood insurance are Florida, California, Texas and New York.

Check with your state’s insurance office for information about private insurance polices.

Tips for Buying Flood Insurance

Here are a few tips for purchasing a flood insurance policy:

Don’t Wait: This is probably the most important tip when it comes to flood insurance. Purchase a flood insurance policy now, waiting until a storm is headed your way may be too late. NFIP policies have a 30-day waiting period and while private policies come with a shorter waiting period, they often stop selling policies once a stormed is named.

If you wait too long you may find yourself on the hook for the cost to repair or rebuild your home as well as replacing all of your personal possessions.

Shop Around: Shop your homeowners insurance coverage on a regular basis and be sure to compare NFIP policies with private flood insurance policies. Insurers rate risk differently so premium quotes can vary dramatically. Make sure you are comparing apples to apples when it comes to deductible and coverage levels.

Supplement Your Coverage: Depending on the value of your home the cheapest option may be to supplement a NFIP policy with a private flood insurance policy. While NFIP may be the cheaper option for the first $250,000 in coverage you may have to look to the private market for additional coverage. Gather quotes from a variety of insurers and determine what combination of coverage’s works best.

Look for Replacement Value Policies: As with all insurance policies you have an option between replacement value and actual cash value. While replacement value policies tend to be slightly more expensive they are well worth it.

Replacement value polices will replace your belongings with an item of the same value and quality. Actual cash value polices take depreciation into account so your 10-year-old TV is basically worthless.