Calling all FHA Borrowers! Private Flood Insurance is now an option.
January 2, 2023
Author: Deena Gallo

New rules now allow FHA homeowners to search beyond the National Flood Insurance Program and into the more affordable private flood insurance market.

New HUD Ruling Allows Flood Insurance Choices for FHA Borrowers

Until recently, the National Flood Insurance Program was home buyers' only flood insurance option. Then the private flood insurance market started to bloom with not only more choices for coverage but better prices that consumers could afford. As of December 2022, the U.S. Department of Housing Urban Development issued its final ruling granting FHA-insured mortgage loans the use of private flood insurance policies. 

Because the FHA requires that insured mortgages have flood insurance policies for FEMA-designated Flood Hazard areas, the ability to get flood insurance from NFIP was too limiting and sometimes, not affordable for those residents living in those areas. Allowing the ability to shop in other markets ensures that more families and individuals are prepared for when disaster strikes and in turn, create more resilient communities.

With the incoming recession, affordability was the ruling's main concern. Floods can be devastating for a family that isn't properly insured. This ruling allows them to have more options for coverage dependent on their family home build and contents as well as extending coverage for living expenses in the case a storm damaged a family's ability to live in their home during repair. All in all, this ruling keeps FHA's policies in line with the original intent for first-home buyers and fulfills its mission of creating strong communities that are sustainable and affordable for all.