NFIP working with private flood is a win for everyone.Texas School Housing
Many believe the private flood market “cherry picks” the best risks from the NFIP, leaving the NFIP with the worst policies. It’s also thought that the NFIP and private flood can not work together. This case proves both theories wrong.
With large commercial risk placements, the NFIP can work together with private flood to compliment the insurance placement. A university in Texas has 62 housing buildings across two locations. Six buildings are within the high risk flood zone and the rest are in “X” zones meaning flood insurance was not required.
Many times on large property policies, flood coverage is included as part of the property policy. However, due to six buildings being located in the high risk flood zone, the property policy provided a $500,000 deductible for flood coverage on all the buildings in both locations. The average building in the complex was not valued at more than $650,000, meaning the deductible greatly lowered the flood coverage on each building. The client wanted to reduce the deductible through a private “deductible buydown” program for 36 of the 62 buildings. A deductible buydown program would lower the deductible to $50,000 per building for the property policy’s built in flood coverage. However, the cost across all buildings for the deductible buydown was $100,000 in premium. This well exceeded the client’s budget. Joe Flood looked to the NFIP and Private for a solution.
Joe Flood looked to the NFIP’s Preferred Risk Policy (PRP) to cover the $500,000 coverage gap on the low risk locations. The deductible on the PRP is $1,250, and includes contents coverage. Because of this, the insured opted to add $100,000 in contents to each building. For the six buildings in the high risk flood zone, Joe placed private flood insurance for about a third less than the NFIP.
So rather than buying “down” the deductible, Joe was able to “buy up” the deductible for $46,000 with the NFIP’s Preferred Risk Policy, versus over $100,000 for private flood deductible buydown program. Included in that price was contents coverage for $100,000 per building. Joe also secured private flood for the six buildings in the high risk flood zone for about $5,000 each. The result was a Deductible of $1,250 per building ($50,000 in SFHA), added coverage of $18,000,000 per occurrence (across all the buildings), $3,600,000 in contents coverage, and overall more insured property!