What Is a Preferred Risk Policy (PRP)?

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Flooded neighborhood (Photo: @dandottaviano via Twenty20)
Generally speaking, home insurance policies provide a standard range of coverage options for the named perils listed within your agreement. Most policies do not provide flood insurance, however. For that, you usually need to pay for additional coverage.
Because the cost of insurance increases with each additional policy or add-on, it’s common for homeowners to pick and choose which policy protections they need. Flood insurance often falls between the cracks. However, according to FEMA, floods are the most common and costly natural disaster in the United States, so it’s important to consider protecting your home with insurance coverage that you can rely on in the event of an emergency.

What is a Preferred Risk Policy (PRP)?

Preferred Risk Policies are available to most homeowners and renters living in areas that have a low or moderate risk for flooding, and function as lower-cost versions of Standard Flood Insurance Policies (SFIPs). Essentially, these policies provide coverage for your home and personal property in the event of any damages caused by flooding or outside water and prevent you from having to pay any out-of-pocket money to repair or replace damaged items within your home.

What Does a Preferred Risk Policy Cover?

Though your coverage limit will depend on a variety of factors, such as specific location and previous claims made, Preferred Risk Policies offer a maximum reimbursement of $250,000 for your home and $100,000 for the contents within it, which comes to a combined amount of $350,000 in insurance coverage.
In contrast, federal disaster assistance only provides impacted homeowners with loans that must be paid back with interest, and FEMA grants that cover damages caused by flooding typically reach about $5,000 per household. Because the average flood claim in 2017 was more than $90,000, paired with the fact that more than 40% of all National Flood Insurance Program claims came from outside high-risk flood zones between 2015 and 2019, it is certainly in your best interest to at least consider purchasing a flood insurance policy.
Preferred Risk Policies provide coverage for your home and its contents, including:
Home
  • Air conditioning (central)
  • Basement (limited coverage)
  • Electrical systems
  • Essential equipment and appliances
  • Foundation
  • Plumbing
  • Structural integrity
  • Water heater
Contents
  • Clothing
  • Electronic appliances (TV, microwave, dishwasher, washer/dryer)
  • Furniture
  • Personal electronics
  • Portable heaters and air conditioners

How to get a Preferred Risk Policy

You must purchase a Preferred Risk Policy through the National Flood Insurance Program, which consists of more than 60 insurance companies that provide coverage for the same price. The average insurance plan starts for as low as $100 each year and can be paid annually or as monthly installments.
Though flood insurance coverage is an essential component to fully protecting any home or building, you must ensure that it is financially feasible for your situation. Be sure to check out FEMA’s Flood Map Service Center to see if your home is located in a flood zone and determine whether you are eligible for the program.