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As Florida reels from the aftermath of hurricanes Helene and Milton, the importance of flood insurance has never been more urgent. 

The storm’s widespread devastation has forced many homeowners to confront the harsh realities of flood risk, even in areas once considered safe. 

Just two weeks after Hurricane Helene struck Florida’s Big Bend, Milton brought catastrophic rainfall flooding. The storm broke numerous meteorological records, including highest rainfall of 18.87 inches in St. Petersburg, and highest known storm surge pf 5-6 feet in various spots such as Naples.

Milton is a stark reminder that storms are becoming more severe, making adequate flood insurance a necessity for all Floridians. 

This urgency coincides with recent federal flood map revisions, which have pushed hundreds of thousands of Floridians—many for the first time—into mandatory flood insurance requirements. In Miami-Dade County alone, 45,000 additional structures are now classified as high-risk.

But the evolving flood insurance landscape isn’t just about heightened dangers. 

The market is shifting with the rise of private insurers and advanced flood risk modeling, offering more comprehensive and tailored policies. While homeowners grapple with the new requirements and rising costs, they are also discovering better coverage options that address their unique needs.

In this new reality, flood insurance in Florida has become more than just a recommendation—it’s an essential safeguard against an unpredictable future.

The latest updates to flood maps and the evolving climate should be driving a surge in demand for flood insurance, particularly in areas newly classified as high-risk.

Instead, however, there is an alarmingly low level of flood insurance coverage among Florida homeowners, says Jean-Luc Eckstein, Chief Customer Officer at Neptune Flood.

"The largest problem is that only 13% of homeowners in Florida have flood insurance," Eckstein told HoneyQuote.  “If you live in Florida, no matter your flood zone, you need a separate flood insurance policy whether from the NFIP or from a private provider such as Neptune.”

This problem is partly due to confusion—many homeowners mistakenly believe their standard homeowner’s policy covers flooding, when it does not. As a result, many Floridians are left unprotected against flood risks, especially in a state prone to hurricanes and rising sea levels.

Compounding the problem is the increased frequency and intensity of storms driven by climate change, says Eckstein.

"[Homeowners in] areas that have never seen flooding before are experiencing water levels they never thought could happen at their property,” he says.

FEMA has observed this too, with 30% of all its claims coming from lower-risk areas, says Region 4 Flood Insurance Liaison, Dewana Davis.

“[There is a problem] with the lack of flood insurance policies in lower risk areas where we are now seeing more flooding than we have in past years,” she told HoneyQuote. “Many people that are not required to purchase flood insurance take on the risk of not securing a flood policy.”

Even those situated high-risk areas are taking this risk.

According to FEMA, only 60 percent of Florida residential properties within the Special Flood Hazard Area (SFHA) maintain NFIP polices. Davis says that cost is a factor for flood insurance, and flooding is “the most expensive disaster we experience throughout the nation.” 

Davis says that since Hurricane Ian caused extreme destruction in 2022, there has been an increase in flood policies. 

“More homeowners are reminded of the devastation flood waters cause and want to make sure they are prepared for the unseen future,” Davis says. 

However, according to data from the NFIP, the number of policies in Florida has declined.

The chart below shows the number policies in force generally increases from July 2023 to May 2024. The chart starts at around 1.7 million policies in July 2023 and peaks at over 1.72 million policies in May 2024, showing a steady rise over the period.

After the peak, the number of policies dips sharply in July 2024. This drop could indicate a trend of non-renewals, cancellations, or a shift to private insurers after the surge in policies earlier in the year.

But there is hope. These days, homeowners have the option of looking at the private flood market for coverage in addition to FEMA’s flood policy, known as National Flood Insurance Program (NFIP). 

Traditionally, the NFIP has been the dominant provider, but the landscape is shifting as private insurers like Neptune enter the market with competitive alternatives. 

Flood insurance was once considered as too risky for private insurers due to the lack of reliable methods for measuring flood risk. However, recent advancements in sophisticated modeling have changed this, enabling insurers to more accurately assess and underwrite flood risk, according to III.org.

As a result, more private companies are entering the flood insurance market, even offering coverage that often exceeds the limits of FEMA’s NFIP policies.

The shift is evident in the numbers: in 2020, 58 private companies were writing flood insurance, up from 41 in 2019, according to S&P Global Market Intelligence.

In 2023, net premiums written for private flood insurance reached $803.1 million, marking a 3.7 percent increase from $774.3 million in 2022. Direct premiums written, which reflect premiums before reinsurance transactions, totaled $1.4 billion in 2023, up 8 percent from $1.3 billion in the previous year.

"The NFIP is by far the largest flood insurance provider, with about 90% of policies issued, but they are rapidly shrinking," Ekstein says. “The private flood market continues to grow substantially each year as homeowners want more coverage to fully protect their properties.”

What does Florida flood insurance cover?

The NFIP offers two types of coverage—building coverage and contents coverage—to protect the home and belongings. NFIP flood insurance offers up to $250,000 in building coverage for your home and up to $100,000 in contents coverage for your belongings.

The coverage only applies to conditions that meet FEMA’s definition of a flood, which include storm surges, and does not cover a burst pipe or a water backup that fills your home with water.

Private flood insurance, like Neptune, offers higher coverage limits and additional high-value optional coverages, according to Ekstein. For example, Neptune offers up to $4 million in building coverage, which is 16 times more than NFIP’s limit of $250,000. 

Additionally, private insurers often provide optional coverages such as temporary living expenses and replacement costs for contents. They also offer coverage for items not covered in the NFIP, such as the contents of your basement, structures not attached to your home such as a garage, pool house, or shed, grills and pools. This broader range of options allows homeowners to fully protect their properties.

FEMA’s Davis says that while many private flood policies exceed the coverage offered by NFIP, homeowners should still make sure their lenders will accept a private policy. There is also a layer of protection against cancellation at NFIP, she adds. 

“Lastly, know that the NFIP cannot cancel your policy for repeated claims, but private flood does not have that restriction and may be able to exercise that option,” she says.

As more private insurers enter the market, so do the rates continue to change.

Historically, flood insurance premiums were steadily increasing, particularly for policies issued through the NFIP. This trend has been driven by several factors, including the rising frequency and severity of flood events, the expanding scope of high-risk zones, and the need for the NFIP to remain financially solvent in the face of escalating claims.

In 2021, the NFIP launched a new pricing methodology known as Risk Rating 2.0,  which aims to make flood insurance premiums more actuarially sound and fair by more accurately reflecting the specific flood risk of individual properties. 

As a result, some policyholders have seen their premiums decrease, while many others faced increases. Moreover, properties in high-risk zones or those newly classified as such have seen sharp increases in their premiums, reflecting the new risk and the need for more comprehensive coverage.

In recent years, however, there have been notable shifts in the premium landscape. With the introduction of private flood insurers into the market, some homeowners have found more competitive rates, especially if they live in areas that have been accurately assessed as lower risk. 

“Increasing private-sector competition can only increase the opportunities to obtain affordable coverage,” says the Insurance Information Institute (III).

How much is flood insurance in Florida?

The average cost of flood insurance in Florida through the federally funded NFIP is $776 per year, or roughly $65 per month.

The following chart provides an analysis of the Top 5 and Bottom 5 NFIP (National Flood Insurance Program) Average Annual Rates by County in Florida. The map highlights the variation in flood insurance premiums across the state, showing significant differences between counties.

The stark difference between the highest and lowest premiums highlights the variability in flood risk across Florida. Coastal regions, especially in the Keys and the west coast, bear the brunt of higher premiums, while inland areas enjoy more affordable rates due to reduced exposure to flood hazards.

What factors impact flood insurance premiums?

Several key factors influence the cost of flood insurance premiums in Florida, with the most significant of these being the property's location within a designated flood zone. 

Homes situated in high-risk areas, such as those newly classified under FEMA's revised flood maps, will naturally face higher premiums due to the increased likelihood of flooding. Conversely, properties in lower-risk zones may enjoy lower premiums, although recent trends indicate that even these areas are experiencing more frequent flooding.

Another important factor is the value of the property and the amount of coverage desired. Higher property values and greater coverage amounts will result in higher premiums. Additionally, the type of coverage—whether it includes just the building, the building and its contents, or additional optional coverages—also plays a role in determining the final premium cost.

Risk assessments are a crucial component of setting these premiums. Insurance companies, particularly private insurers like Neptune, use data and technology to assess the flood risk, Ekstein says.

“Private flood companies like Neptune, thanks to always using the latest data and technology, have been providing premiums that accurately reflect the risk to reduce any large increases year over year,” he says. “By pricing the policy right the first time, we reduce the chance of abnormal increases at renewal.”

How will climate change impact flood insurance?

Looking ahead, projections suggest that flood insurance premiums may rise, particularly in light of ongoing climate change and its impact on storm frequency and intensity. Homeowners might expect further increases as FEMA continues to update flood maps and as private insurers refine their risk assessment models to account for these changing conditions.

This is where private insurers can stand out, says Ekstein.

“Flooding is the most common and costliest natural disaster in the United States. As the climate changes, areas that have never experienced flooding or heavy storms will start seeing flooding events. Droughts can also play a big factor in flooding. Dry grounds from a drought cannot absorb water quickly enough when it rains, causing flash floods,” Ekstein says. 

“Warmer temperatures in areas where snow historically sticks until late spring have seen earlier and faster melting, causing water runoff at higher levels. This is where private flood insurance excels – we take all of these changing data points into consideration when providing the most accurate rate for insurance premiums.”

What are some ways to save money on Florida flood insurance?

The rising cost of flood insurance premiums has made affordability a significant concern for many Floridians. To address this, several programs are available to assist homeowners in managing their flood insurance costs. Government subsidies and grants play a crucial role in making flood insurance more accessible, particularly for low-income homeowners or those living in high-risk areas.

The NFIP offers discounted rates for properties that meet certain criteria, such as those that have taken measures to mitigate flood risk through elevation or floodproofing. Additionally, FEMA provides grants through programs like the Flood Mitigation Assistance (FMA) program, which helps fund projects that reduce or eliminate the risk of repetitive flood damage to buildings insured under the NFIP.

Private insurers also offer various discounts and incentives, particularly for properties that have implemented flood-resistant measures.

The flood insurance market is undergoing a transformation, with new products, services, and providers entering the scene. Private insurers are at the forefront of this change, offering policies that go beyond the traditional limits set by the NFIP. 

A key driver of this transformation is the rapid adoption of LiDAR (Light Detection and Ranging) technology, which has significantly enhanced flood risk modeling. LiDAR uses laser pulses to create detailed, high-resolution maps of the Earth's surface, capturing even subtle variations in elevation. This advanced technology provides a far more precise assessment of a property's flood risk than previous methods, allowing insurers to develop more accurate and tailored flood insurance policies.

Technological advancements like LiDAR, combined with cutting-edge data analytics, machine learning, and predictive modeling, are revolutionizing risk assessment processes. These tools enable insurers to offer more refined pricing of flood insurance policies, making it possible to more accurately predict potential claims. The integration of LiDAR has been especially impactful, as it helps insurers understand how water moves across the landscape, which is critical for areas experiencing new or exacerbated flood risks due to climate change and urban development.

This tech-driven approach not only benefits insurers but also provides homeowners with more precise and customized coverage options, ensuring they are protected based on the most up-to-date risk data. LiDAR-based modeling allows insurers to price policies more competitively, while also encouraging more Floridians to consider coverage in areas where flooding might not have been previously anticipated.

The integration of these technologies into claims processing is another area of significant innovation. Automated claims systems, powered by artificial intelligence, are expediting the resolution process, reducing the time it takes for policyholders to receive compensation after a flood event. This results in a smoother, faster recovery for affected homeowners, further enhancing the appeal of private flood insurance options over traditional NFIP coverage.

As LiDAR and other advanced technologies continue to shape the flood insurance landscape, both insurers and policyholders are better positioned to mitigate flood risks and manage the financial impact of flooding events.

In its issues brief, Flood: State of Risk, the Insurance Information Institute stated: 

“It is reasonable to expect that, as the cost of participating in the government-run flood insurance program rises for some, private insurers will recognize the market opportunity and respond by applying cutting-edge data and analytics capabilities, more refined pricing techniques, and new products, such as parametric insurance, to seize those opportunities.”

How Community Collaboration and Innovation Are Shaping the Future of Flood Insurance in Florida

The future of flood insurance in Florida is not just about new products and technologies; it’s also about strengthening the collaboration between insurers, government entities, and the communities they serve. Community initiatives are increasingly recognized as vital components in enhancing flood preparedness and resilience. Local governments, nonprofits, and grassroots organizations are working together to raise awareness about flood risks and the importance of securing adequate insurance coverage.

“We are working with communities in Palm Beach County to schedule Open House events that allow citizens to come in and view the map changes and speak to insurance specialists to see how it may impact flood insurance requirements in their area,” says FEMA’s Davis.

“As maps continue to be update and change in different areas, we will continue to work with local communities to provide events where they can learn about those map changes

As the flood insurance market continues to innovate and communities become more involved, the future outlook for Florida’s flood insurance landscape is one of increased preparedness, improved protection, and stronger collaboration. 

The combination of advanced technology, comprehensive insurance products, and active community engagement will be key to navigating the challenges of an increasingly unpredictable climate.

Conclusion

Florida’s flood insurance market is undergoing a pivotal transformation, driven by updated flood maps, innovative private insurers, and cutting-edge technologies like LiDAR and AI. 

Homeowners are navigating a more complex landscape of rising premiums, new coverage mandates, and evolving risks. Yet, within these challenges lie opportunities—both for property owners seeking more personalized and comprehensive coverage, and for insurers leveraging advanced tools to better assess and manage flood risk.

As the market continues to shift, collaboration between insurers, government agencies, and communities will be essential in enhancing flood preparedness and resilience. 

By staying informed and proactive, Floridians can secure the protection they need against the increasing threat of floods, ensuring that they are not just reacting to disasters, but are prepared for the future. As private insurers continue to expand their offerings and technology reshapes the industry, the flood insurance market is poised to become more adaptable, responsive, and accessible for all.