Excess Flood Insurance: What Is It? Who Needs It?

Excess flood insurance is a kind of private flood insurance that extends your limits beyond government-sponsored National Flood Insurance Program (NFIP) coverage. If your house would cost more to rebuild than the NFIP limit of $250,000, you should consider adding excess flood insurance, especially if you live in a high-risk flood zone.

Who needs excess flood insurance?

Flood insurance is generally required for homeowners who have federally backed mortgages in special flood hazard areas. If this describes you, every lender will require you to carry flood insurance that covers the smallest of these three:

However, if your home has a rebuild cost (or mortgage) of more than $250,000, your lender may require you to buy coverage beyond the NFIP maximum. It's not a legal requirement, so not all lenders will insist that you buy additional flood insurance. You may find a lender that will provide you with a mortgage even if NFIP flood insurance doesn't completely protect you.

Even if you're not required to buy excess flood coverage, it may be worth the extra expense, especially if you live in an area at high risk of flooding. Special flood hazard areas have a 26% chance of flooding over the course of a 30-year mortgage. If your home is completely destroyed and the $250,000 is not enough to repair or rebuild your house, you'll be on the hook for the remaining costs. Carefully weigh the risks against the price of coverage before deciding whether to buy excess flood coverage.

Who doesn't need excess flood insurance?

Most people do not need excess flood insurance. In particular, you don't need it if your home's replacement value is less than $250,000, because NFIP coverage is sufficient. You also likely don't need excess flood coverage if your home is not in a high-risk area of flooding, as the policy could be costly.

How are excess flood insurance rates determined?

Excess flood insurance rates are set similarly to regular flood insurance prices. The cost will depend on the coverage limits you choose, whether you select actual cash value or replacement cost value, and the overall flood risk of your home. Flood risk is a complex formula based on several criteria. These include:

Unlike NFIP flood insurance, every excess flood insurance provider sets its own rates. This means prices will vary from company to company. Check with several to find the cheapest.

What does excess flood insurance cover?

Excess flood insurance covers the same types of damage and expenses covered under regular NFIP insurance. This includes repairing or replacing your home's structure and essential systems if they are damaged by flooding, whether from a rainstorm, tsunami, hurricane or other cause.

The insurance also pays for personal property in your home, such as clothing, furniture and electronics. But personal property coverage in NFIP insurance is subject to a separate $100,000 limit. Additionally, there are often restrictions for items kept in a basement, as they are more likely to be damaged during a flood.

Some excess flood insurance companies may also go beyond what's covered under the NFIP. This might include reimbursing you for loss of income, additional living expenses and even costs of flood prevention, such as sandbags. The availability of these coverages varies by insurance provider, so check multiple companies if there is a specific coverage you need.

Excess flood insurance coverage limits

There is no legal maximum coverage limit for excess flood insurance. As such, each company sets their maximum. Coverage limits can go up to millions of dollars. For instance, Chubb offers up to $15 million of combined coverage for your home and its contents.

An alternate option: Completely private flood coverage

If you want or need coverage beyond the $250,000 NFIP limit, one alternative to supplementing it with excess flood coverage is to buy a completely private flood insurance policy. A completely private policy and a combination NFIP/excess coverage policy carry many of the same benefits, but there are some differences to consider.

You may also find that a single flood policy from a private company has cheaper rates than separate private and public policies. Another perk is having to manage only one policy: There's only one bill and only one claim to make.

On the other hand, purchasing separate excess flood and NFIP policies instead of a single private policy allows you to reap the benefits of both private and government-backed flood insurance policies. For example, the $250,000 allotment you have through the NFIP can't be canceled or not renewed because of high risk. Plus, the government sets NFIP rates using a formula. By choosing a public/private combination, you're also guaranteed to meet your lender's flood insurance requirements.

Most importantly, both options allow you to cover the entire value of your home, often up to limits of millions of dollars. If you're considering excess flood coverage, you should collect quotes from multiple insurance companies, for both an excess policy and a totally private one, and consider which option more closely aligns with your needs.