Flood Insurance Coverage

The National Flood Insurance Program Dominates

The National Flood Insurance Program (NFIP) is the nation's largest single-line insurance program, providing nearly $1.3 trillion in coverage with 4.7 million policyholders nationwide. Most people get flood insurance through FEMA's National Flood Insurance Program, making it the clear market leader in flood insurance coverage.

How NFIP Operates

FEMA administers the NFIP through a partnership between the federal government, the property and casualty insurance industry, states, local officials, lending institutions, and property owners. Each year, more than 47 private insurance companies participate in the Write-Your-Own (WYO) program, selling and servicing NFIP policies through their insurance agents. However, FEMA retains responsibility for underwriting flood insurance coverage sold under that program.

NFIP Coverage Limits and Structure

The NFIP provides flood insurance coverage up to $250,000 for homes and $100,000 for personal belongings. Federal flood insurance offers up to $500,000 for nonresidential buildings. The program is available to anyone living in one of the 22,600 participating NFIP communities.

Private Market Growth

While NFIP dominates, some private insurers now offer standalone flood insurance policies as risk modeling and actuarial projections have improved. You can usually get a policy with higher coverage limits through a private flood insurance company compared to NFIP's caps. According to LendingTree, using 2023 data, the average cost for private flood insurance is $98 monthly, while NFIP coverage averages $75 monthly.

Market Challenges and History

The U.S. government created the National Flood Insurance Program in 1968 when private companies stopped offering coverage. The federal program, backed by taxpayers, has been chronically in debt, borrowing from the Treasury to pay claims. The nation's insurance industry has essentially walked away from the business over cost and risk, ceding coverage to a government program.

Bottom Line

The National Flood Insurance Program provides the vast majority of flood insurance coverage in America, serving as the primary insurer when private companies found the market too risky. While private options are emerging with potentially higher coverage limits, NFIP remains the dominant provider with nearly 5 million policyholders and over $1 trillion in coverage nationwide.