Excess flood insurance is a supplemental flood insurance policy that lays on top of another flood policy, providing additional coverage when the underlying policy falls short in a claim. Basically, if you have flood damage that exceeds your flood policy’s coverage amounts, then excess flood insurance can make up the difference.

The reason some homeowners need excess flood insurance is because they buy their coverage from the federally backed National Flood Insurance Program (NFIP). Unfortunately, those policies max out at $250,000 for damage to a residential structure and $100,000 for damage or loss of contents. That coverage amount may not be enough to rebuild your home after a total loss.

How excess flood insurance works

Let's say you own a home valued at $800,000 near a lake so you buy a flood policy from the NFIP. One day, the lake overflows, and your home is severely damaged. The flood destroys your personal belongings and ruins the home’s flooring, electrical systems, appliances, and drywall to the tune of $650,000. 

Your NFIP flood policy covers $250,000 the repairs to your home as well as $100,000 of your personal items. However, that leaves you on the hook for the remaining $300,000. 

Now let’s imagine you went to a private insurer to get excess flood insurance. That policy would  help cover the rest of your losses, minus your deductible and up to your policy limits.

Who needs excess flood insurance?

Excess flood coverage is a good idea for anyone who owns property in an area that’s susceptible to flooding or who has concerns about the coverage amounts in their flood insurance. For example, you might want an excess flood policy if you:

• Own a home or business property in an area prone to flooding. High-risk flood zones are often near water, including lakes, rivers, streams, ponds, and oceans. But low-lying areas and those located near swamp lands can also have flooding issues.

• Have a mortgage. An excess flood policy is often an affordable way to get the coverage amount your lender requires. This may be particularly true if you live in a region that’s been designated as a Special Flood Hazard Area (SFHA). Homes in SFHAs must get flood coverage when they have a federally backed mortgage.

• Have significant assets to protect. Excess flood insurance provides an extra layer of protection for people who have expensive property, like a high-value home.

• Have flood insurance that doesn’t match your home insurance. If your flood insurance limits are lower than those on your homeowners policy, then you may not have enough coverage to rebuild after a total loss.

One important thing to note about that final bullet point: Your home insurance policy does not cover flood damage. In fact, that’s a big reason the National Flood Insurance Program was created. The government wanted to make sure people with properties in flood-prone areas had access to flood insurance. 

This concern may be increasing, as recent changes in the climate and new housing and commercial developments put more people at risk for flood damage.

What excess flood insurance covers

Excess flood insurance typically covers flood damage caused by perils like:

• Hurricanes.

• Storm surge.

• Water sources overflowing their banks.

• Heavy rainfall.

• High tides.

Some excess flood insurance only covers what the underlying insurance policy covers. So if you have a policy from the NFIP, then your excess flood insurance extends that policy’s limits for flood damage to the structure of the building you’re insuring and its contents.

But other excess flood policies can extend coverage to losses that the underlying policy doesn’t. For example, the NFIP doesn’t cover items in a basement, but you may be able to get an excess flood policy that does. Many excess flood policies include additional living expense coverage if your property becomes uninhabitable from flood damage.

Another important thing to note is that excess insurance pays benefits only after the coverage limits in the underlying flood policy have been met. That’s true whether the underlying flood insurance is from the NFIP policy or a private insurer.

Cost of excess flood insurance

Excess flood insurance premiums can vary from insurance company to insurance company. This is because every insurer has its own way of determining rates, but most take into consideration factors like your property’s:

• Location.

• Elevation.

• Proximity to a water source.

Other factors that can influence how much excess flood insurance costs is the amount of coverage you need and the deductibles you select. Generally, you want to insure your home for its replacement cost. That’s usually a different amount than your home’s market value. 

Your deductible is the amount you’re responsible for when you file a claim. People sometimes want a higher deductible because it lowers their premiums. However, you want to balance that lower premium against what you can afford in a worst case scenario.

You may also be able to save on excess flood insurance costs by minimizing your risk of flood and water damage. In some cases, homeowners have even raised their homes above their location’s base flood level to minimize their potential for flood damage.

Another way to save is to look at both NFIP and private insurers when you’re considering getting excess flood insurance. There can be big differences between what both offer in terms of  rates and coverage limits. 

Benefits of excess flood insurance

Perhaps the biggest benefit of excess flood insurance is the peace of mind it can bring to those who acquire it. You can sleep better knowing that your home is covered if you do experience flooding.

You might also see a benefit if you have a mortgage. Some mortgage companies require flood insurance, and getting the right amount of coverage at a premium you can afford might be tricky if your home has a history of flooding. An excess flood insurance policy can be a good way of meeting your mortgage company’s requirements.