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.