FEMA flood insurance: Comparing the pros and cons of flood insurance options

Since FEMA began Risk 2.0 in 2021, raising many homeowner's flood insurance rates, more property owners have dropped their policies.

A recent Houston Chronicle analysis shows one in twelve buildings and homes in the Houston area have canceled their FEMA coverage, totaling 45,000.

But now more insurance companies offer private flood insurance, and more mortgage lenders accept it.  

FOX 26 Houston is now on the FOX LOCAL app available through Apple TV, Amazon FireTV, Roku and Google Android TV!

So let's look at how they wash out.  

FEMA's National Flood Insurance Program offers a maximum coverage of $250,000 to rebuild, no matter how much your home is worth, and a maximum of $100,000 for damaged contents.

Even if you live in a high risk zone, you can still buy FEMA coverage.

NFIP usually costs more than private flood insurance.  But it is backed by the federal government, so you don't have to worry it could go out of business and leave you stranded.

"With the FEMA product through the National Flood Insurance Program, there is a 30-day waiting period. So if you go and buy a policy today, you're not going to have it for another 30 days," explained Richard Johnson of the Insurance Council of Texas.

MORE SMART SENSE: Houston storm: How to apply for food replacement costs after storm

NFIP costs an average of $786 a year in Harris County, and $992 a year in Galveston County.

Now let's look at private flood insurance, which is offered through insurance companies, including Allstate, Geico, Neptune, Travelers, and Wright.  

Premiums for private insurance can be lower than FEMA's, yet can offer enhanced coverage, such as living expenses if you can't live at home after a flood, and much higher coverage limits.

"Some of the benefits they have include actually higher coverage rates than the FEMA program. It's even double, even some of them are even triple what you can get for coverage through FEMA," said Johnson.


Private flood insurance also often has shorter waiting times to take effect.  Some start as soon as you pay the premium.

The downside of private insurance is that it can deny your application if your home is high risk, it can have deductibles, and private companies can go out of business, which could leave you uninsured.

MORE SMART SENSE: Houston flooding: Take these steps to minimize damage of a flooded car

On average, private insurance can be a few hundred dollars less a year than FEMA.  

You can check an insurance company’s financial strength on sites like AM Best and S&P Global.

Here's an important note:  if you cancel FEMA coverage, then you want to buy FEMA again later, you must reapply and may not receive the discounts you received in the past.

MORE SMART SENSE: Convicted con man shares insights into growing crime of title theft

Flood insurance for renters is also available, covering the contents of a home.  Nerdwallet reports NFIP flood insurance for renters starts as low as $99 a year.