When we talk about flood insurance, not many people are aware there are multiple types of flood insurance and that they have options to choose one, or even mix and match them. Your individual needs will dictate which option works best for you. Let’s take a look at two options; National Flood Insurance Program or NFIP which you likely have purchased or used, and private flood insurance.
What’s the difference? Great question! NFIP is a federally funded program administered by FEMA that only runs in certain areas. Although NFIP flood insurance is typically cheaper, it can potentially leave some significant coverage gaps. The waiting period for NFIP coverage to take effect is 30 days except in the event of a real estate transaction. The waiting time for private flood insurance to take effect is 10 days (vs 30 days for NFIP) except in the event of a real estate transaction.
NFIP building coverage maximums for homes are much lower, maxing out at $250,000. This is fine if your home or property values accordingly, but we are talking hundreds of thousands of dollars that could potentially be lost if your home is valued above that cap.
NFIP content coverage maxes out at $100,000. Again, if you know your personal belongings value for that amount or less, then NFIP could be a great option for you. (It is worth mentioning that you are not covered for extra living costs or other additional coverage items i.e. pools, unattached structure or basements).
Now let’s talk about private insurance and why this can be a better choice for some. With private flood insurance, maximum coverage for your home is up to $2,000,000 as opposed to $250,000. This is great for anyone with a higher value home.
What about private flood insurance on your personal property? Coverages here max out at $500,000 as opposed to $100,000 and you can elect replacement cost value instead of the depreciated actual cash value often used. Also, depending on your needs and the policy that was built for you, private flood insurance can cover additional living costs such as a hotel and additional coverages regarding pools, basements, etc.
The question we get asked a lot is which one is better? This answer depends on what you know you need for your home. We are knowledgeable and sell both types of policies. Give us a call at 512-759-0558 so we can talk it through and determine which is the best fit for you.