Flood losses are excluded under traditional homeowners and renters insurance policies. But private market options, in addition to policies administered by FEMA's National Flood Insurance Program (NFIP), give property owners peace of mind when a flood event occurs.
One advantage of obtaining private flood insurance is that insurers typically offer higher coverage limits than the NFIP, AM Best reported. And thanks to advances in technology and in weather and property data, private insurers can write flood risks more accurately.
But a significant protection gap remains despite improvements in the private flood market, according to the Insurance Information Institute (Triple-I). The "Flood: Beyond Risk Transfer" paper produced by the Triple-I in April 2021 indicates the current approach to flood risk is "insufficient and unsustainable." It follows that only 30% of homes in high-risk flood areas of the U.S. carry flood insurance, according to the Risk Management and Decision Processes Center of the University of Pennsylvania's Wharton School.
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