Differences Between
Flood Insurance Policies and Homeowners Insurance

• The NFIP flood policy only covers direct damage by or from flood. In contrast, a typical homeowners policy excludes damage by flood, as do many commercial or business owner policies.

• Unlike homeowners and business policies, there are no endorsements that can be purchased which change the coverage in a NFIP Flood Policy.

• It is important to understand the exact meaning of flood and rising water, in any of those policies, to understand the risks excluded in each. Note that coverage for flood risks might be available, for additional cost for some specialty commercial policies and for homeowners with high value property, but that this coverage is not part of the NFIP flood program.

• The NFIP flood policies, the exact language of the three flood policy forms, are mandated by the U.S. Congress.  ¹   It takes an Act of Congress to change the policy forms. Typical homeowner policies are amended by insurance companies with the approval of State regulatory authorities.

• The NFIP flood policy is part of a program administered by the NFIP, which is a part of FEMA, all created by Acts of Congress. That program is managed by administrators who write and follow regulations which control everything about the NFIP Flood program -- everything from community eligibility, to underwriting, to costs, to claims.

• Some elements of coverage in the NFIP Flood Policy are very limited, especially when compared to a typical homeowners insurance policy. This includes extreme limitations of flood coverage in basements -- areas with floors below ground on all four sides.

• Contents coverage must be explicitly purchased, and that coverage is not at replacement cost, rather at Actual Cash Value. There is a separate deductible for contents coverage.

• Flood insurance, offered through the NFIP/FEMA is completely separate from other assistance which might be provided by FEMA after a natural disaster. However, those others assistance programs may, and do, request information about covered and non-covered losses under any insurance, including non-flood and NFIP Flood programs.

• For commercial flood losses, there is no coverage for business interruption under the NFIP program.

• One might buy a flood policy for a condominium unit, but the unit's property damages might be covered by the condo association's NFIP flood policy.

The claims process for a claim on a NFIP flood policy is distinct from a claim under a homeowners or commercial/business policy. More information on some of the differences between claims handling for flood and homeowners insurance claims are available. Information, there, also applies to commercial and business owner policies, and how their claims are different.