The following is a Dialogue with a client in regards to Private flood Insurance vs the National Flood Insurance Program administered through FEMA we also will explain where Lloyds of London Flood Insurance fits within this whole Private Flood mix and then finish up with different Private flood insurance companies we shop in order to get the best price for the cost of flood insurance.
What is the NFIP vs Private Flood Insurance?
Robert, thanks for getting back to us so quickly, we are still waiting for other quotes but can you tell me what makes these costs so low?
Jason great question, the short answer is this option that I found for you through my shopping of all of our many private market flood insurance options and the government or National Flood Insurance Program (NFIP).
Here’s a bit more about the flood Insurance market.
Lloyds of London Flood Insurance is different from the NFIP in that is truly a Private Flood Insurance option (a private company that is not just a reseller of NFIP policies like your Progressive flood insurance, State Farm Flood Insurance for example).
This makes Lloyds of London Flood Insurance an Excellent alternative to the government NFIP program.
There are really only two types of flood insurance policies
NFIP Vs. Private flood
1) The NFIP (National Flood Insurance Program NFIP administred though FEMA Federal Emergency Management Agency which is also known as the government option (they were the only players in flood insurance since 1969 and have had a 50-year monopoly). The NFIP policy is a one-size-fits-all.
And for decades, the NFIP has over-charged 50 percent of its policyholders and under-charged the other 50 percent, while it has racked up $42 billion in taxpayer-funded losses, equating to more than half of every claim paid by the NFIP since 1978.
2) The Private Flood Insurance (usually through Lloyds of London) however was written into law with BW12 (2012) as the government officials try to control the rising cost of flood insurance for property owners, and as the market continues to develop there are a few other options for those who need to buy flood insurance (because of a loan).
Basically the Private flood insurance market brought competition to the NFIP (they don’t like this) but the private flood insurance market uses the latest technology and computer modeling to rate on risk maps and will look at each property individually for rating a property resulting in lower cost for property owners and you are one of the recipients of this.
We are a flood insurance agency ONLY.
Most insurance agent (especially local agents) are a generalist and write whatever they can get. Mostly Auto and home policies.
Since we only write flood insurance, we know what is happening in the flood insurance market both the private flood insurance market and NFIP.
We shop all option in your market to get you the best coverage at the best price.
Sometimes thats the NFIP, more often then not a private market flood insurance (Expecially Lloyds of London flood insruance) policy is the best fit, and if you have been with the private market flood insurance for a while there might be other options out there. SO it is always a good idea to review your flood insurance policy every few years.
The private flood insurance market is still growing, we will shop all the options available in your state and help you understand the NFIP policy Vs. the Private flood Insurance options (we the only National flood insurance company that shops all viable options).
We will continue to look for a policy until we get a premium we think is fair for your property this does take some time for some properties but most we can place rather quickly.
Most of the time with your properties (unless you have a positive Elevation and verified with an Elevation Certificate) the private market is going to be your best option.
Robert, this is great information, hey I was talking with my neighbor and they are getting a much lower rate then I am seeing can you explain why? I think they said they were in a flood zone X?
Hi Jason again another great question.
So far we are seeing NFIP beat the private flood insurance market in premium for structures that are in a flood zones X.
As for your neighbor paying only $560 a year, I am sure this is because they are in a Flood zone X (considered moderate to low-risk) your property is showing up as an AE flood zone map (considered higher-risk).
A flood insurance rate map that is in an AE or V flood zone maps are examples of high-risk. And, if your property is located in one of these then your lender likely will require you to purchase a flood insurance policy in order to get as a loan for your home or commercial property.
There are other factors that you will need to consider about your neighbors home, and the rate they are getting.
They might be covering less, they might not have coverage for contents or lower coverage or they might have a really high deductible, other things to consider is their building might be elevated, or newer construction or grandfathered which will give them access to government-subsidized premiums. So it is hard to compare one property to the other unless you can get ahold of their DECLARATION page and let us review it we can see how they are getting the low premium.
However, I think they are likely in an X flood zone or elevated. Your property is in an AE and your lender is requiring coverage of $250,000 you have $860 is a great price for flood insurance coverage for your property.
And looking at the Map below I think the X zone.
Here is how you can understand this map.
The map indicates where the property line is, the light blue is AE (or High risk or SFHA flood zone) and if your structure is in this area your lender likely will require you to have flood insurance.
The orange is considered an *X500 which the lender is not likely to require flood insurance the Attached PDF which is called a Flood Zone Determination (FZD) is what your lender will pull to let them know if they have to require flood insurance.
What a flood zone determination looks like
Robert, that makes sense, let’s get this policy placed.
There are still some things we can do to make sure we are looking at the property from all angles. This only applies if we are going through the NFIP policy.
The best way to see if the NFIP if your best option is to GET an Elevation Certificate
1) You can ask if the current owner has an Elevation certificate (EC) official name but sometimes people call them “Flood Cert” which is not the official name but means the same thing (however we have found that some people think the “FZD” (Image of the document above) is an “EC” or “Flood Cert” however it is not.
An Elevation Certificate looks like this and will give a bunch of number (elevations) of different areas around your property.
Like the lowest floor, where machinery is located, where the lowest area where the outside dirt touches your structure and the highest place where the outside dirt touches the building.
These are Called LAG (Lowest adjacent grade) and HAG (Highest adjacent grade). A good EC will contain photos of the building and great one have photos of the inside too. They are usually 3, 5 or more pages long.
Elevation Certificates are typically used for rating an NFIP policy vs Private flood insurance (that don’t use it) however some private flood companies are asking to see them and if there is one you should provide it to us to assist in our shopping.
If they have an elevation Certificate please send along and we can see if once applied we get a better rate. And if they don’t have one you should ask the seller to give you money toward one they can be anywhere from $600 – $1200 to get one.
See if you can find or GET an NFIP Declaration page also called DEC page from the current owner.
2) Another option is to see if the current owner has a flood policy on the property now, sometimes they may have some grandfathered subsidized policy and if you are working with a flood expert or flood nerd or even a local agent that understands how to property write flood insurance policies we can “port over” their premium to your new policy and keep their same premium, however, this is a bit more tricky and really need someone who knows how to do this.
Below is an example of what a DEC page should look like.
Robert, you really are a NERD (he he) thanks for this information we want to work with you wants the next step.
Wonderful news we will work up the paperwork for your private flood insurance policy now.
Private flood insurance like Lloyds of London Flood Insurance is a little different than buying from NFIP.
The NFIP policies are sold through resellers like Progressive flood Insurance, or State Farm flood Insurance, they have a contract with the government and can only resell the government policy some people think they have a private flood policy with one of these companies but that is not true.
Lloyds of London is not one company, but rather a collection of various syndicates that accept different risks.
And within these different Lloyds syndicates, there are managing general agents that we can shop to find the best place for your property. Please note that if you have an LLOYD policy it might be one of 5 – 10 different options you can have us shop for you.
Our promise with a Better Flood Insurance we will shop all private flood insurance options as well as the NFIP to ensure we are getting you the best price.
Private flood Insurance companies
The private market flood insurance is an alternative to the federal government or NFIP.
There is a company out there called Private Market Flood also know as The Flood Insurance Agency and is one example of a company that offers policies other than the government policy.
This companies CEO has done a lot for the private flood insurance market and has testified on capitol hill trying to educate our senators about the private market flood insurance as a valid alternative to NFIP.
You see the NFIP has had a 50-year monopoly so we need to make sure people understand there are options.
For decades, the NFIP has over-charged 50 percent of its policyholders and under-charged the other 50 percent, while it has racked up $42 billion in taxpayer-funded losses, equating to more than half of every claim paid by the NFIP since 1978.
Their coverage matches what is offered by the NFIP, and they do have some interesting options such as Rate-Lock and Flood ready though.
Their backing company is Lexington Insurance Company, an AIG company.
There are other a few advantages and disadvantages to this policy that you need to understand so ask your agent if not us to explain.
Sometimes we have found that their premium is less then the NFIP policy and sometimes the NFIP is a much better price if rated correctly – this is why we shop all options to get you the best coverage.
They will consider properties that have had a flood loss (case by case). They write nationally so they like us.
Let’s look at some of the Lloyds of London Flood Insurance options.
Although we have mentioned this earlier please know there are many private flood insurance options on the market.
There are also many separate Lloyds of London flood insurance options and more are coming to market every day.
Many are what I call “me too” products meaning they are copying what other companies have already created or they copy the NFIP policy but below are some we work with and are watching because they are pushing this flood insurance market forward.
National Catastrophe Flood Policy (not to be confused with N”F”IP).
They are a “Lloyds syndicate or coverholder” and are really competitive primarily in the A and AE flood zone.
This policy has limited coverage for contents in the basement (NFIP does not any contents in the basement). Offers what is called Loss-of-use; can pay on Replacement Cost; Can cover higher than the NFIP limits (both case by case). Does not penalize property owners that second homes (like the NFIP does). Writes both Residental and Commercial flood policies, can line item any other structures on your parcel, (note you need to make sure you discuss this with your agent to make sure all structures are covered), can write multiple properties on one policy. They don’t take everything and can be a bit choosy about what they will accept. Usually will pass on anything that has had a flood loss but will consider if you put in an app. We shop all options so if this one works for your property we will offer it. If not written correctly there might be a co-insurance penalty (I intend to write a blog post on this because it is too much to explain here). This is why you need an agent that is an expert and not a dabbler to make sure you have good coverage. There are a few other nuances to this option. But overall we give it a big thumbs up. Oh, and the CEO is wicked smart, very nice and a hoot to watch in the room when we challenge the NFIP norm. They write nationally.
Another Lloyds of London private flood coverholder is called Superior Flood.
This policy is solid and very competitive in A and AE flood zones. This policy has the best coverage for the basement contents and will cover on Replacement Cost, they can be very picky about what properties they will offer to cover, however, can offer higher coverage (on case by case) offers $2,000 limited loss of use, offers $2,000 limited other structures, writes both residential and commercial is very competitive on commercial if you can get this policy. Might write something one year and then “not renew next year” leaving you to shop yourself unless you are working with us. CEO is driving the industry and a down to earth OHIO guy.
Some newer policies we are watching are underwritten by a Lloyds of London syndicate called CHUBB we have seen them be very competitive in V flood zone (finally relief for our oceanfront properties). They will only cover on Replacement Cost of residential meaning you can’t get a policy for just your loan amount (which I don’t really endorse but seems to be what people want) Only have a residential option for right now. Suppose to have a competitive X flood zone product.
There are a few other Lloyds of London flood Insurance syndicated we work with, named Lockton (only in CO and NM)
Lloyds of London Flood Insurance has several advantages over the NFIP.
Lloyds of London flood Insurance is often a lower premium for better coverages, with most of our Lloyds options we don’t need an elevation Certificate in order to provide a quote. Because we look at all the private flood Insurance underwriters that Lloyds of London flood insurance providers have and understand the various underwriting guidelines for each Lloyds of London flood Insurance companies.
Lloyds of London flood insurance companies won’t take every property and some can be rather picky about what risk they will take on, some may not meet the underwriting guidelines by one carrier, but may be accepted by another.
If you are purchasing a home that is in a high-risk flood zone (usually your lender will tell you). You will be required to get flood insurance coverage to get the loan for your mortgage. Give us a call and we can help you shop your flood insurance options and help you get into the home of your dreams.
As for working with us we would be honored if we get your business, although we are more interested in educating around the subject of flood insurance and if you come away from this email/blog post with a bit more knowledge and are now a savvy buyer of flood insurance policies either private vs NFIP we feel like we have done our job.
AT your service kind regards Your flood Nerd.
Ok, so we might be a bit sad if you choose not to work with us…..