What are my Private Flood Insurance options? Cost of private flood insurance vs NFIP

This is such a great question and we hear all the time what are the flood insurance options?

Many people believe that the Government flood insurance policy administered through FEMA also called the NFIP is the only option and that was true for 50-years when the NFIP had a monopoly on flood insurance.

Private flood insurance can save people money.

Since the NFIP (National Flood Insurance Program) had complete control over the flood insurance market peoples premiums got really expensive and they cried out to our government to do something.

In 2012 Congress pass a law allowing Private flood insurance which is any other option for flood insurance that is not the government or NFIP.

The NFIP program has been mismanaged and quite honestly unfair to those who are forced to purchase it if they want their home.

We are here to help, WE are the FLOOD NERD.

The government-run National Flood Insurance Program (NFIP) has been, virtually the only source for the five million homes that are in a high-risk flood zone.

Recent years of flooding are causing tens of thousands of Americans to cover the risk of flooding even if their lender isn’t requiring the coverage.

The NFIP is broken and needs to be fixed but this is ladened with political pressures. This is likely why the program just keeps getting extended rather than addressing the issue we have with flood insurance.

In 2017 the program exhausted its $30 billion capacity (yes taxpayers are paying for this programs faults) this put the program $57 billion dollars in the red.

Americans are calling for fundamental changes to the program and this includes creating competition through the private flood insurance market (namely Lloyds of London flood insurance) and a few other smaller private flood options.

One of the saddest behaviors we see is that properties that are most at risk for flooding and are vulnerable to flooding are forgoing the purchase of this important coverage.

Such risky behavior but they believe that the government will “bail them out” and why should they. We have been bailing them out for 50 years and our federal government needs to stop this practice.

What has happened since this program has been created in 1968?

Building in areas that have flooded and are major flood risks – is rapid, the program is enabling construction in areas that are flood-prone aka coastlines, and then through political pressures, these beachfront properties (that are likely to flood) are being mapped out of the high-risk flood zone which allows them access to a government-subsidized policy that charges premiums too low to reflect the true cost of the risk.

The program has many other problems. For instance, its flood maps can’t keep pace with the new construction, new construction means more paved land and essentially changing the way that water will flow.

Why Is Flood Insurance So Expensive?

The government program has historically paid multiple billion of taxpayers money repairing houses that are just going to look again. One property being repaid 19 times for a total of $912,732 for a home that is only worth $42,024.

The current administration feels that this year our lawmakers must address the program. And private flood insurance is to be a big part of this reform.

New construction is supposed to be flood-resistant, however, if the flood zone is politically altered (aka properties on barrier islands that are mapped out of high-risk (A or V flood zones) into low-risk (X-flood zones) that allow the property owner to get the government-subsidized policy.

Builders are not forced to build in a way that would help protect the property from flooding.

The private flood insurance market is anxious, willing and completely able to take everything except the severe repetitive-loss properties.

Lloyds of London Flood insurance insures the world for flooding so they know how to rate risk and how to cover it too. Plus they have the capital to handle the catastrophic event such as flooding.

While the government program has more than five million homeowners, this is just a small fraction of the properties that are actually in a high-risk flood zone.

One public report exposed how NFIP pricing worked. The program demands that every property get an Elevation Certificate that is unique to each property however in this report the rating is being done on house-by-house information but rather on old reports and poor satellite imagery and models that simply do not work.

This is because Congress gives the program administers a legal mandate to work with the local communities, not individual households to map and survey floodplains.

This practice has found that the NFIP undercharges 50 percent of all its risk, and then it overcharges 50 of the remaining policies holders. This is madness.

Lloyds of London Flood insurance is using the latest technology to asses risk. They use complex computer modeling, laser mapping, and the best technology from very advanced satellite to get a more accurate risk and thus the savings for the policyholder.

Providing premiums that are half the cost of the standard NFIP in a high-risk flood zone.

Lets look at NFIP policies vs Private flood insurance policies.

There are many options available now in regards to flood insurance but they basically fall into two main categories.

1_The National Flood Insurance Program (NFIP) also known as FEMA which is the Government option for flood insurance and has enjoyed a 50-monopoly on the flood insurance market.

If you have Nationwide flood insurance, State Farm Flood Insurance, Progressive Flood Insurance or any of the logos below then you are buying an NFIP flood policy.

Progressive Flood Insurance

The Private flood insurance market

There are alternative to the NFIP or government insurance and this is called Private flood insurance most notably Lloyds of London Flood insurance, however, there is more than just one Lloyds of London Flood insurance one options available. Although many would have you believe they are all the same.

The flood nerds shop all the options for your property in your region to ensure you are getting the best premium if you are ready to have us do the work for you click here. 

Our shopping does include the NFIP because sometimes we find that with government subsidies you can get a much better premium.

YES PLEASE SHOP MY FLOOD INSURANCE

Lloyds of London Flood Insurance Market

We are fortunate to have many Lloyds of London flood insurance options. Although many Lloyds of London flood insurance companies will have you assume that they are the only option available nothing could be further from the truth.

Lloyds of London has a rich history and is attributed to have invented the very first modern insurance model. Unlike most of its competition, Lloyds of London is not really a company but rather a corporate body, this structure works quote well obviously since it has been around for over 330 years. Lloyds operates under multiple financial backers that all pool their capital to spread the risk.

I have two blog post that takes a deep dive into Lloyds of London and what they mean to Colorado’s flood insurance market if you are interested links are below.

https://www.betterflood.com/blog/lloyds-of-london-flood-insurance/

https://www.betterflood.com/blog/nfipvsprivate/

Lloyds also insures the world for flood insurance meaning they cover flooding events in India, Australia as well as much of Europe, you see the “game” of insurance is to spread your risk since Lloyds is worldwide they can easily do this.

My joke here is that Lloyds is banking on Gods promise that he won’t flood the entire world again, …..so they won’t have to pay out the whole worlds flood claim.

The rest of this article we will be doing a cost of flood insurance comparison and will give you an idea of the cost of flood insurance.


How much does private flood insurance cost? – Lloyds of London Flood Insurance (option 1)

Coverage of $250,000 building coverage (no Contents coverage) and $5,000 deductible

Lloyds of London Flood Insurance. (option 1)  

Annual premium in High-Risk flood zone is $849.75

This option is great and we are very happy when we can get this option for our clients. They can be a bit choosey about what risk they will accept and extend an offer for. They will not take any property that has had any floodwater in it regardless of the situation.

They do offer limited coverage for basements (one of the few most flood policies exclude coverage for basements). This policy also will give you about $2,000 for loss of use while your home is being repaired. And $2,000 for other structures so if you have a large second structure on your property you might want to look at getting an additional policy to cover that structure, Please speak with your agent. As with all Lloyds of London flood policies, they will not require an Elevation Certificate to get a good rate.

YES PLEASE SHOP MY FLOOD INSURANCE


Private flood insurance – Lloyds of London Flood Insurance (option 2)

Coverage of $250,000 building coverage (no Contents coverage) and $5,000 deductible

Lloyds of London (option 2)  

Annual premium in High-Risk flood zone is $1,050.75

This option is great and we are very happy when we can get this option for our clients as well. They seem to be writing almost all risks, however, they do not write any property that is in a designated floodway or has the depth of -4 under the BFE in our example with our BFE being 5368 feet above sea level, if the lowest floor is 5364 then they will not accept this risk, they will not take anything that has had a flood loss.

They do offer limited coverage for basements about 2% of the building coverage (this is better than the NFIP but not exactly what we would like to see –  it is better than nothing though). They do not require an Elevation Certificate to rate. And you can use a percentage of your coverage for loss of use usually 10% of coverage.

If you want coverage for other structures than that will need to be added and can be easily done on this policy. Note make sure to tell your agent if there are any other structures on the property if the policy doesn’t have that written on the policy there will not be coverage for any other structure.

YES PLEASE SHOP MY FLOOD INSURANCE


Private Flood insurance option (option 3)
Private flood insurance (option 3) Not Lloyds,

Coverage of $250,000 building coverage (no Contents coverage) and $5,000 deductible

Annual premium in High-Risk flood zone is $2,358.79

This option will take properties that have had one flood loss before as long as it has been more than five years and the payout was under $100,000 on the claim. Their coverage matches the NFIP.  Will write practically all risks, don’t need an elevation certificate to rate and are a bit lower in premium than the NFIP.

They have a unique option where you can lock the rate for up to 5 years. We have found though that this option sometimes in the second year is more expensive than the NFIP. We usually move back to the NFIP until we can find another option.

YES PLEASE SHOP MY FLOOD INSURANCE


Private Flood insurance – Lloyds of London Flood Insurance (option 4)

This option has to be written on the replacement cost of the building otherwise there is a co-insurance penalty that kicks in. So $250,000 might be a bit low in your area but to keep this going let’s just use that for this option

Coverage of $250,000 (RCV) building coverage, 20% Contents coverage standard, 10% other structures and 10% loss of use and $5,000 deductible

Annual premium in High-Risk flood zone is $1,637.70

This option will consider taking a property that has had one flood loss before as long as it has been more than five years and the payout was under $50,000 on the claim. Their coverage must be at Replacement cost which is a bit different from some of our other Lloyds options we usually reserve this one if the property doesn’t fit into any of our option above.

We can adjust coverages to control premium. Will write practically all risks, don’t need an elevation certificate to rate and are a bit lower in premium than the NFIP and some of our other private flood market options they are only in a few states though.

YES PLEASE SHOP MY FLOOD INSURANCE


Private Flood insurance – Lloyds of London Flood Insurance (option 5)

Annual premium in High-Risk flood zone is $759.00

This option will consider taking a property that has had one flood loss before as long as the payout was under $15,000 on the claim. They have a really slick system and can issue the policy instantly. They don’t need an elevation certificate. You can get some unique coverages like pool repair and refill.

YES PLEASE SHOP MY FLOOD INSURANCE


Private Flood insurance – Lloyds of London Flood Insurance (option 6)

Annual premium in High-Risk flood zone is $1,720.10

This option will consider taking a property that has had more than one flood loss but not anything that has been recent with in the past 5 years. They can sometimes be slow on the delivery of a Declaration page, so if you have a quick closing we may want to place you somewhere else.

YES PLEASE SHOP MY FLOOD INSURANCE

Note this list isn’t exhaustive and we have many other options we were just hoping to give you an idea of the cost of flood insurance with the private market.

We shop all option and when we get the best price we will send that option to you.

Yes Shop for my Flood Insruance