Best Flood Insurance Based on In-Depth Reviews

The federal agency FEMA defines a flood as “A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least 1 of which is the policyholder’s property) from 1) Overflow of inland or tidal waters; 2) Unusual and rapid accumulation or runoff of surface waters from any source; or 3) Mudflow; or a Collapse or subsidence of land along the shore of a lake or a similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above.” This means that, even if your house is inundated completely and you end up losing everything due to a burst water pipe inside your home, this disaster would not be considered as one caused by “flooding” and is therefore not covered by flood insurance.

In the US, flood insurance is almost exclusively offered by the federal government, via FEMA’s National Flood Insurance Program (NFIP). The NFIP was created to provide affordable flood insurance to all US homeowners, and it sets the premiums, deductibles, and coverage limits throughout the nation. Specifically, NFIP policies have coverage caps of $250,000 for residential buildings, $100,000 for residential contents, and $500,000 for business buildings and contents.  

If you apply for a mortgage backed by the federal government for a property located in an area deemed at risk by FEMA, you’ll be required to get flood insurance for said property. For other property owners, there are two main ways to get flood insurance:

1) Directly with the NFIP: If your property is located in a “participating community” (communities that are implementing NFIP’s floodplain-management measures), you may purchase flood insurance directly from one of the NFIP Direct Servicing Agents. In this scenario, there are no intermediaries between you and your insurer (the federal government.) However, there are two major setbacks to this approach:

1. The coverage will be capped by the limits set by the NFIP.
2. The best private insurers (such as the ones included in this review) usually have more resources (specially technical and human resources) to handle major disasters than the government does, which means you’ll have a better chance of getting your claim paid faster if you go the private route.

2) Via the NFIP’s “Write Your Own” Program (WYO): If your property is not in a community participating in the NFIP’s program, you may still get flood insurance via one of the dozens of private insurance companies participating in the NFIP’s “Write Your Own” Program (WYO). Even though you’ll be getting the flood policy via a private insurer, the rates and coverage limits will not vary from insurer to insurer, as they’re set by the federal government. This option is ideal for people who are already policyholders of a participating insurance company, since they can just add flood insurance to their current policy and take advantage of any benefits or discounts that may be available for “bundling.”  

Regarding types of coverage, there are three options:

1. A standard, standalone policy with the rates and limits set by the NFIP.
2. A private “excess flood” policy to get coverage above the limits set by the NFIP.
3. A private “flood endorsement” policy that can be added to your private home insurance for an additional premium.

However, you should know that options 2 and 3 (“excess” and “endorsement” policies) are not underwritten by the federal government, which means that the private insurer is responsible for handling and paying any claims that may arise.

The NFIP offers two policies: one for your home’s structure and another for your belongings. They must be purchased separately, and each policy has its own premiums according to your specific needs. Coverage for all NFIP policies are paid at actual cash value for contents and replacement value for primary residences.

What can be done to prevent flooding and flood-related damages?

According to Bruce McVicar, Assistant Professor in the Department of Civil and Environmental Engineering at the University of Waterloo, who specializes in floods and urban stormwater management, these are the steps that can be taken by individuals, communities, and cities:

 On a single house scale, people can:

• Divert roof and driveway runoff to grassed areas rather than to the road or sewers.
• Plant more trees or create rain gardens to soak up the runoff and help it infiltrate into the ground (but not close to foundations of the house).
• Make sure that the ground is sloped away from their house all around the house
• Pay particular attention to any openings to the house that are below the ground level.  Reverse-slope driveways and window wells can be entry points for water.

 At a community or neighborhood scale:

• Ensure that the stormwater drainage system is in good shape by unclogging drains and gutters.
• Plant more trees and reduce large impervious surfaces like parking lots.
• Look for opportunities to add some stormwater management ponds and wetlands, particularly for large parking lots and roofed areas.
• Check the topography to think about how water would drain in a really big event.

At a city or watershed scale:

• Encourage homeowners to manage stormwater on their property with incentives and free consulting/design guides, subsidized approved contractors for landscaping and house drainage work that has a purpose of stormwater management.
• Develop watershed and neighborhood drainage plans.
• Regulate development near waterways.
• Educate the public.
• Infrastructure fixes - stormwater management facilities, bigger sewer pipes, larger bridge openings to reduce the potential for flooding.

NFIP Flood Insurance Coverage

① Building Coverage - What is covered

Areas Below Lowest Elevated Floor*

② Contents Coverage (Must be purchased separately)

The Costs of Flood Insurance

In 2020, the average annual cost for NFIP-backed flood insurance is $708. However, this number will vary according to the specifics of your property.

While NFIP rates are the same when it comes to private insurers, that does not mean that premiums are the same for all properties. To further explain, let’s take Houses A and B as an example. If the NFIP has determined that House A must pay an annual rate of $500 for flood insurance, the rate of $500 will remain the same regardless of which private insurer is offering the policy for House A. On the other hand, House B, which is located just across the street from House B, only has to pay $400 in annual rates, and this rate will also remain the same throughout all private insurers. Why the $100 difference?

The following factors come into play when it comes to the pricing of your flood insurance policy:

• The flood zone* (as designated by FEMA) in which the property is located
• Property age
• Property elevation
• Number of floors
• Building occupancy
• Foundation type

*The NFIP and FEMA use “flood maps” to determine an area’s vulnerability to flooding. The maps are divided by zones, and each zone is assigned a level of vulnerability, from lowest to highest. 

Lastly, you should know that, like most types of insurance, NFIP flood policies require the payment of deductibles. For homes with $100,000 or less in coverage, the minimum deductible is $1,000. For homes with coverage over $100,000, the minimum deductible is $1,250.