The gov’t is letting more homeowners ditch the NFIP for private flood insurance


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Homeowners with Federal Housing Administration-backed mortgages can now buy private flood insurance to satisfy their loan requirements. It’s a sign of expanding consumer choice in response to a burgeoning private flood insurance market. Previously, if you had an FHA mortgage and lived in a high-risk flood zone as defined by the Federal Emergency Management Agency, you could only buy policies through the National Flood Insurance Program. The policy change became effective Dec. 21.

“The choice to select a private flood insurance option may enable some borrowers to obtain policies that are less expensive or provide enhanced coverage,” Julia Gordon, Federal Housing Commissioner, said in a statement.

The rise of private flood insurance

The number of active private flood insurance policies has grown rapidly in recent years, according to data collected by the National Association of Insurance Commissioners. The federal government initially created the NFIP because private flood insurance was not available from the private sector.  But rising prices for NFIP policies have made private flood insurance more feasible, says Kathleen Schaefer, a flood risk management expert and doctoral candidate at the University of California, Davis. Hundreds of thousands of people dropped their flood insurance after FEMA raised rates on millions of properties to better reflect flood risk.  The new pricing methodology, Risk Rating 2.0, increased costs for around 3.8 million households.

Lawmakers have made steady progress allowing people to use private flood insurance to satisfy mortgage lenders’ requirements. The Biggert-Waters Flood Insurance Reform Act of 2012 required lenders to accept private flood insurance policies for homes in high-risk flood zones (though federal rules only solidified this requirement in 2019), but FHA loans, which are backed by the federal government and are typically given to people who can’t otherwise obtain mortgages, were an exception.

Advancing technology has also helped private flood insurance companies gain a foothold. Flood risk catastrophe models have improved, allowing companies to better estimate the risk of insuring a given property, Schaeffer says.

“There’s a number of firms that produce (catastrophe models), and most of the other big insurance companies have their own,” she says.

In comparison, the NFIP’s flood maps are outdated, even after Risk Rating 2.0, and fail to account for rising flood risk caused by climate change, according to critics including the National Resources Defense Council. These maps are one reason why people who live outside of FEMA high-risk flood zones are responsible for more than 20% of all flood insurance claims. Thanks to their more advanced flood maps, private flood insurance companies may have a better reading of flood risk in certain areas, Schaeffer says.

“It’s going to be difficult for insurers to insure hurricane risk, but river rain flooding and even some of the coastal flooding that we have in California is totally insurable,” she says.

How to shop for private flood insurance

Depending on where you live, you may be required to buy flood insurance. Flood damage isn’t covered by standard homeowners insurance, so it may be a good purchase even if it’s not required.

Before you shop, be aware of an important distinction: NFIP policies are primarily sold by private companies, who write the policies using their own name and branding. NFIP policies have to adhere to certain regulations, while private flood insurance may be able to offer higher protection limits and other policy enhancements. But a company that sells NFIP policies may not necessarily sell private flood insurance policies. Schaeffer recommends working with a licensed insurance broker to compare private flood and NFIP policies in your area.

There are some downsides to private flood insurance. The biggest is that your insurer can cancel or not renew your policy if it thinks your home is too high risk. This is not a worry with the NFIP. Private flood insurance policies also typically require a higher out-of-pocket deductible when you make a claim.

The NFIP is more than $20 billion in debt, and it faces an uncertain future. Congress recently reauthorized the program through Sept. 30, 2023, but many observers say it’s in need of reforms to meet the challenge posed by climate change. Private flood insurance may look like an increasingly viable alternative if that fails to happen.

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6 ways to lower your homeowners insurance rates


In order to keep your home insured, you have to pay monthly or annual premiums. The amount is largely dependent on your address, the age of your home and your insurance score.

Rates are also affected by factors that are completely out of your control — things like the financial health of your insurer and the reinsurance companies (your insurance company’s insurer who helps them pay for claims). When carriers suffer a record-setting number of losses in a given year, that affects future premiums.

If your rates went up in the last month or year and you’re wondering how that happened, the horrible wildfire season may be part of the reason, but there are plenty of ways to mitigate the increasing prices. Here are six ways to lower your homeowners insurance rates.




If you noticed something has changed on your homeowners insurance bill, like an increase in coverage amounts and higher rates, the first thing you should do is call your insurer and discuss your bill with them. They’ll most likely give you a reason and may suggest tangible ways to get your rates lowered as well as any potential discounts you’re missing out on.


Potential discounts you can find on your insurer’s policy declarations page are:

  • Multi-policy discount: If you have two or more policies under the same carrier, like a home and auto insurance bundle, that can potentially save you anywhere from 20% to 30% on premiums, depending on the insurer.
  • Claim-free discount: Some carriers will offer you discounts for not filing claims.
  • Protective devices discounts: If your home is fitted with deadbolts, smoke detectors, fire extinguishers, and fire and burglar alarms that contact law enforcement directly, most insurers will offer you a nice discount.
  • First-time homebuyer discount: Most insurance companies will offer discounts for new homebuyers.
  • Senior citizens discount: If you’re 55 or 60 and older, your insurer may offer up to 10% off your premiums.
  • Long-term policyholder discount: If you’ve been a policyholder with the same insurer for five years or more, it’s common for insurers to offer 10% loyalty discounts.


The lower your policy’s deductible is, the higher your premiums will be, and vice versa. If you’re currently paying a $500 or $1,000 deductible and your rates went up, a good way to get those down is to ask your insurance company about raising your deductible. You only pay your deductible when you file a claim, and if you’re a responsible homeowner who’s never had to file a claim before, then increasing your deductible may be a good option.


If you remodel sections of your home, modernize or winterize your home’s electrical and plumbing, or added storm shutters, storm-resistant shingles, or a disaster-resistant garage door to your home, let your insurance company know — they will likely reward you with lower rates.


If a company won’t budge on their rates, don’t be afraid to comparison shop for a better price. This may lead you to …


This is especially true if you live in a high-risk coastal area and buy your policies through government programs, like the Texas Windstorm Insurance Association (TWIA) in Texas. You may be paying more for government plans than you would if you went through a private insurer, so be sure to check with agents in your area to see if they offer comparable – but more inexpensive – policies.

Still curious about how homeowners insurance works? Here are the answers to 20 questions you may be too embarrassed to ask.

This article originally appeared on Policygenius and was syndicated by


Featured Image Credit: EEI_Tony / iStock.


Myles Ma

Myles Ma is an editor at