Is Private Flood Insurance Legitimate? Yes.
Issued by non-admitted carriers and MGAs at The Flood Insurance Guru. Regulated through state surplus lines offices. Accepted by lenders when the policy contain the private flood insurance acceptance clause. And often cheaper than the NFIP.
Yes, private flood insurance is legitimate and legal. However, it works differently than most people assume. Private flood insurance is generally issued by non-admitted companies or Managing General Agents (MGAs) that are not typically licensed in the state where you live. This is the case with most high-risk insurance products, not just flood. These carriers are regulated by state insurance departments through surplus lines offices, and your lender is required to accept policies that contain the private flood insurance acceptance clause under the Biggert-Waters Act. We have placed over 4,400 flood insurance policies with premium and carrier data across 30+ states through 24 different carriers.
What Is Private Flood Insurance?
Private flood insurance is flood coverage provided by private companies rather than through the federal government's NFIP. Most private flood insurance is issued by non-admitted carriers or Managing General Agents (MGAs) companies that are not licensed in the state where your property is located. This is standard practice for high-risk insurance products including flood, earthquake, hurricane wind, and wildfire.
The private flood insurance market has grown rapidly from 41 companies in 2019 to over 58 by 2020, and it continues to expand. This growth is driven by homeowners seeking alternatives to rising NFIP premiums under Risk Rating 2.0. We currently work with 24 different carriers and MGAs.
Lender Acceptance Requires the Private Flood Insurance Acceptance Clause
Your lender is not automatically required to accept any private flood policy. The policy must contain the private flood insurance acceptance clause—specific language confirming the policy meets federal requirements under 42 U.S.C. § 4012a(b). We ensure every policy we place includes this clause so your lender has no basis to reject it.
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What Is Private Flood Insurance?
Private flood insurance is flood coverage provided by private companies rather than through the federal government's NFIP. Most private flood insurance is issued by non-admitted carriers or Managing General Agents (MGAs) companies that are not licensed in the state where your property is located. This is standard practice for high-risk insurance products including flood, earthquake, hurricane wind, and wildfire.
The private flood insurance market has grown rapidly from 41 companies in 2019 to over 58 by 2020, and it continues to expand. This growth is driven by homeowners seeking alternatives to rising NFIP premiums under Risk Rating 2.0. We currently work with 24 different carriers and MGAs.
Lender Acceptance Requires the Private Flood Insurance Acceptance Clause
Your lender is not automatically required to accept any private flood policy. The policy must contain the private flood insurance acceptance clause—specific language confirming the policy meets federal requirements under 42 U.S.C. § 4012a(b). We ensure every policy we place includes this clause so your lender has no basis to reject it.
Who Regulates Private Flood Insurance?
Private flood insurance is regulated by state insurance departments but not in the way most people assume. We are going to be more transparent with you on this page than almost any other flood insurance website, because we believe you deserve to understand exactly what you are buying.
Private flood insurance is generally issued by non-admitted companies or Managing General Agents (MGAs) that are not typically licensed in the state where you live. This is the case with most high-risk insurance products not just flood insurance. Specialty risks like flood, earthquake, hurricane wind, and wildfire are commonly written through the non-admitted (surplus lines) market because the standard admitted market will not cover them.
Admitted vs Non-Admitted: This Matters for Your Rights
The distinction between admitted and non-admitted carriers determines your rights as a policyholder. Most flood insurance websites skip this entirely. We will not.
ADMITTED (LICENSED IN YOUR STATE)
Admitted Carriers
Licensed in your state. Rates are filed with and approved by your state's Department of Insurance. If an admitted carrier becomes insolvent, the state guaranty fund protects your claim. You have full consumer protection rights under state insurance law. The carrier cannot pull out of your state without a formal regulatory process.
NON-ADMITTED (NOT LICENSED IN YOUR STATE)
Non-Admitted / E&S / Surplus Lines
NOT licensed in your state. That is the key difference. Non-admitted carriers and MGAs are not subject to state rate filing which gives them pricing flexibility to write risks admitted carriers will not touch. But they are NOT backed by state guaranty funds. They can pull out of a state with relatively short notice. You have different and fewer consumer protection rights than with an admitted carrier.
Your Rights Are Di!erent: Admi"ed vs Non-Admi"ed
| Your Rights | Admitted Carrier | Non-Admitted (E&S / MGA) |
|---|---|---|
| Licensed in your state? | Yes | No (not licensed in your state) |
| Rates filed with state? | Yes (state approved) | No (sets own rates - more pricing flexibility) |
| State guaranty fund? | Yes (protects you if carrier fails) | No (no state safety net if carrier fails) |
| Can carrier leave your state? | Must go through formal regulatory process | Can exit with relatively short notice |
| Consumer protection rights? | Full state consumer protections | Different and fewer protections |
| Where to file complaints? | State Department of Insurance | State surplus lines office (different process) |
| Policy forms? | Often standardized by state | Carrier/MGA designs own forms (more flexibility) |
Can a Non-Admitted Carrier Pull Out of My State?
Yes, non-admitted carriers and MGAs can exit a state with relatively short notice compared to admitted carriers. They have more flexibility to stop writing new business or non-renew existing policies.
"In our experience, we have never seen a situation where a non-admitted flood carrier pulled out of a state and left claims unpaid. The carriers and MGAs we work with—CatCoverage, Argenia, Neptune, Sterling, Dual, and others—are financially strong companies operating in a growing market. But the possibility exists, and you should understand it before purchasing."
Why Most Private Flood Insurance Is Non-Admitted
This is not unique to flood insurance. Most high-risk insurance products—flood, earthquake, hurricane wind, wildfire, coastal property—are written through the non-admitted market. The admitted (standard) market will not cover these risks at a price most people can afford. That is literally why the NFIP was created in 1968—admitted carriers refused to cover flood.
The non-admitted market (also called the E&S or surplus lines market) is a $115+ billion industry that exists specifically to fill gaps where admitted carriers will not go. It is not new, not experimental, and not a scam. But it operates under different rules, and your rights as a policyholder are different.
The Private Flood Insurance Acceptance Clause
For your lender to accept a private flood insurance policy, the policy must contain what is called the Private Flood Insurance Acceptance Clause. This is a critical piece of federal regulation that most homeowners and many insurance agents do not fully understand.
What Is the Private Flood Insurance Acceptance Clause?
Under the Biggert-Waters Flood Insurance Reform Act and subsequent federal guidance, a private flood insurance policy must meet specific requirements for a federally regulated lender to accept it in lieu of an NFIP policy. The policy must contain language—the acceptance clause—confirming it meets these requirements.
What the Policy Must Include for Bank Acceptance
For your bank or mortgage servicer to accept your private flood insurance policy, the policy must:
| # | REQUIREMENT | WHAT IT MEANS |
|---|---|---|
| 1 | Cover the building and/or contents | Must cover the same property types as an NFIP policy—building coverage, contents coverage, or both. |
| 2 | Meet the coverage amount required by the lender | Must meet or exceed the lesser of: the outstanding loan balance, the maximum NFIP coverage ($250K residential building), or the replacement cost of the building. |
| 3 | Cover flood as defined by the NFIP | The policy's definition of "flood" must be at least as broad as the NFIP's definition: a general and temporary condition of partial or complete inundation of two or more acres or two or more properties. |
| 4 | Not contain conditions that narrow coverage below NFIP | The policy cannot exclude coverages that the NFIP would provide for the same property type. |
| 5 | Include a requirement to give 45-day cancellation notice | The lender must receive written notice at least 45 days before the policy is cancelled or non-renewed—this protects the lender's collateral. |
| 6 | Name the lender as a loss payee or mortgagee | The lender must be listed on the policy so claim payments are directed appropriately. |
| 7 | Include the acceptance clause language | The policy must contain specific language stating it meets the private flood insurance requirements under 42 U.S.C. § 4012a(b). |
What Happens If the Policy Does Not Have the Acceptance Clause?
If the private flood policy does not contain the mandatory acceptance clause, your lender is not required to accept it. Some lenders may still accept it under their discretionary authority—federal guidance allows lenders to accept policies that do not meet the strict statutory definition if the lender determines the policy provides sufficient protection. But this is at the lender's discretion, not a requirement.
What This All Means for You
When you purchase private flood insurance through us:
- ✔ Standard Practice: The policy is issued by a non-admitted carrier or MGA—this is standard for flood insurance.
- ✔ Financially Rated: The carrier is financially rated (most carry AM Best ratings).
- ✔ Bank Ready: The policy includes the private flood insurance acceptance clause—your lender must accept it.
- ✔ Market Stability: We work with multiple carriers—if one exits a market, we move you to another.
- ✔ Vetted Carriers: We monitor carrier financial strength and would never place a policy with a carrier we do not trust.
- ! Transparency: Your rights are different than with an admitted carrier—fewer state protections, no guaranty fund.
The key question is not whether private flood insurance is legitimate—it absolutely is. The key question is whether you understand the admitted vs non-admitted distinction, the acceptance clause requirements, and are comfortable with the tradeoff of better pricing and coverage for fewer state-level protections. For most homeowners, the savings and coverage advantages make this tradeoff worthwhile. But we believe you should make that decision with full information, not marketing spin.
Private vs NFIP: What OurNational Data Shows
From 4,403 closed deals with premium and carrier data across 30+ states including Alabama, Georgia, Texas, Ohio, Tennessee, Arizona, New York, North Carolina, Indiana, South Carolina, Missouri, Illinois, Kansas, Arkansas, Utah, Nevada, California, Washington, Oregon, Michigan, Massachusetts, New Hampshire, Iowa, Minnesota, Wisconsin, West Virginia, Mississippi, Kentucky, Nebraska, Oklahoma, Pennsylvania, New Jersey, and Connecticut, private carriers consistently outperform the NFIP:
Price Comparison National Data (4,403 Deals)
| METRIC | NFIP | PRIVATE CARRIERS |
|---|---|---|
| Total closed deals analyzed | 4,403 deals | Across 30+ states |
| Lowest national premium | Varies by zone | Under $200/yr |
| Highest national premium | $15,094/yr (NFIP Direct) | $103,000/yr (commercial complex) |
| Georgia private share | 4% (3 of 71) | 96% (68 of 71) |
| Alabama avg residential range | Higher | $250 - $1,200/yr |
| Texas avg residential range | Higher | $250 - $2,000/yr |
| Ohio avg residential range | Higher | $250 - $1,500/yr |
| Tennessee avg residential range | Higher | $200 - $1,000/yr |
| Arizona avg residential range | Higher | $150 - $800/yr |
| National Zone AE avg range | $593 - $15,094/yr | $250 - $2,500/yr |
Coverage Comparison
| FEATURE | NFIP | PRIVATE |
|---|---|---|
| Residential building cap | $250,000 | $500K to $2.5M+ |
| Loss of use / ALE | Not included | Often included |
| Replacement cost (contents) | ACV only | RCV available |
| Waiting period | 30 days | 10-15 days typical |
Private Carriers We Write ThroughNational Data
We are not locked into one carrier. We shop every available private carrier for every property. Most of these carriers are non-admitted (E&S) or operate through Managing General Agents (MGAs). From our HubSpot CRM, we have placed policies through 24 different carriers:
| CARRIER | NATIONAL PREMIUM RANGE | CARRIER TYPE | SPECIALIZATION |
|---|---|---|---|
| CatCoverage | $150 - $7,200/yr | Non-Admitted / MGA | Properties with good elevation, residential & commercial |
| Argenia | $250 - $13,000/yr | Non-Admitted / MGA | Standard residential, investment properties |
| Neptune | $250 - $10,720/yr | Non-Admitted / MGA | Mid-range residential, suburban markets |
| Sterling Underwriters | $250 - $24,500/yr | Non-Admitted / MGA | Wide range residential to large commercial |
| Wright Flood | $250 - $31,723/yr | NFIP WYO + Private | Write Your Own carrier for NFIP policies. Also operates private brokerage. |
| Dual | $250 - $10,125/yr | Non-Admitted / MGA | Investment properties, coastal commercial |
| AON Edge | $312 - $9,686/yr | Non-Admitted / MGA | Higher-risk properties, Zone A |
| NFIP Direct | Varies - $15,094/yr | FEMA Only | Federal government program. Used when no private option is competitive. |
Understanding the Three Types of Flood Insurance Carriers
Non-Admitted / MGA: Not licensed in your state. Sets its own rates. NOT backed by state guaranty funds. This is the majority of private flood carriers.
NFIP Write Your Own (WYO): Private insurance companies (like Wright Flood, Bankers, and Assurant) that are authorized to sell and service NFIP policies on behalf of FEMA. The policy is still an NFIP policy with NFIP rules and limits. The carrier handles the servicing.
NFIP Direct: Purchasing an NFIP policy directly through FEMA rather than through a WYO carrier.
Note: Palomar previously offered residential flood insurance but no longer writes residential flood policies. Carrier availability and appetite change over time, which is one reason we monitor and work with multiple carriers. If one carrier exits a market, we move you to another.
Common Myths About Private Flood Insurance
Myth
"Private flood insurance is not real insurance."
Fact
Private flood insurance is real, legally binding insurance issued by companies regulated by state insurance departments. Most carriers are non-admitted (surplus lines), which is standard for high-risk insurance products. They carry financial strength ratings, are legally obligated to pay claims, and your lender must accept policies with the proper acceptance clause.
Myth
"My lender will not accept private flood insurance."
Fact
Federal law (Biggert-Waters Act) requires lenders to accept private policies that contain the private flood insurance acceptance clause. We ensure every policy we place includes this clause. We have placed policies accepted for FHA, VA, USDA, conventional, jumbo, and reverse mortgage loans.
Myth
"Private carriers will not pay claims."
Fact
Private carriers are legally obligated to pay valid claims. From our experience handling 2,000+ flood claims, private carriers often process faster than NFIP.
Myth
"Private flood insurance costs more."
Fact
From our data, private carriers beat NFIP pricing for the majority of properties. Average private carrier residential premiums start under $250/yr for favorable properties while NFIP averages are significantly higher.
Myth
"The NFIP is the only option for high-risk properties."
Fact
Private carriers write Zone AE, Zone A, and Zone VE. In Georgia, 96% of our Zone AE deals are through private carriers.
Frequently Asked Questions
What does it mean that private flood carriers are non-admi!ed?
Most private flood insurance is issued by non-admi!ed companies or Managing General Agents (MGAs) that are not licensed in the state where you live. This is standard for high-risk insurance products including flood, earthquake, and hurricane wind. Non-admi!ed carriers are regulated by state insurance departments through surplus lines o"ices, but they are not backed by state guaranty funds and can exit a state with shorter notice than admi!ed carriers. Your consumer protection rights are di"erent and fewer than with an admi!ed carrier.
What is the private flood insurance acceptance clause?
The acceptance clause is specific language that must be included in a private flood insurance policy for your bank to accept it. It confirms the policy meets federal requirements under 42 U.S.C. § 4012a(b) including matching the NFIP's definition of flood, meeting lender coverage requirements, providing 45-day cancellation notice to the lender, and naming the lender as loss payee. Without this clause, your lender is not required to accept the policy.
Will my bank accept private flood insurance?
Yes if the policy contains the private flood insurance acceptance clause meeting federal requirements. Under the Biggert-Waters Act, federally regulated lenders must accept qualifying private policies. The policy must meet coverage minimums, use the NFIP definition of flood, include 45-day cancellation notice to the lender, and contain the statutory acceptance language. We ensure every policy we place includes the proper clause.
Can a private flood carrier pull out of my state?
Yes. Because most private flood carriers are non-admi!ed, they can exit a state with relatively short notice compared to admi!ed carriers. In our experience, we have never seen a non-admi!ed flood carrier leave a state and not pay existing claims. But the risk exists. This is why we work with multiple carriers if one exits your market, we move you to another.
Are there any admi!ed private flood insurance carriers?
A small number of private flood carriers are admi!ed in certain states, but the vast majority operate as non-admi!ed or through MGAs. The admi!ed vs nonadmi!ed distinction a"ects your consumer protection rights and whether state guaranty funds apply it does not a"ect whether your lender accepts the policy, as long as the acceptance clause requirements are met.
Is private flood insurance cheaper than NFIP?
In most cases, yes. From our data of over 12,000 policies, private carriers beat NFIP pricing for the majority of properties. In Georgia, 96 percent of our deals are private. Our lowest private premium is $100 per year versus $593 for our lowest NFIP premium.
Can I switch from NFIP to private flood insurance?
Yes. You can switch at any time with no penalty. Your lender must accept the private policy as long as it contains the acceptance clause and meets coverage requirements.
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