Private flood insurance solutions can work for you.Cape Cod Yacht Club
Private flood insurance is a great new option for insureds. In some cases, private flood insurance gives better priced than the NFIP. But as we see in this example, due diligence must applied before making the switch from the NFIP to a private option.
Joe Flood looks for the best option for his clients. But that best option can come with a catch. In this instance, the Insured was more than happy to explore options with strings attached.
A yacht club on Buzzards Bay, Cape Cod had, for years, an NFIP flood insurance policy in place for about $22,000 per year in an AE zone. The yacht club, like many buildings on Cape, was built in the mid 1930’s. After the insured requested Joe Flood to review other options, Joe realized there was an error in the flood zone determination, and the building had always been in the VE zone. Joe also realized the building was rated with a full below grade basement foundation, but in reality had a walkout basement. Both changes to the NFIP rating increased the premium to somewhere in the $70,000 a year range.
Because the building had a walkout basement foundation and not a below grade basement, the private flood market could write the risk competitively. The challenge became that, if the insured left the NFIP, the NFIP could penalize them if they had to return for any reason. Typically, a catastrophic loss would need to occur for the insured to be “kicked out” of the private market and forced to return to the NFIP. However, the insured needed to understand there would be a much higher rate if they had to re-enter.
The new private flood quote came in at $13,900 per year, and the saving was greater than the risk of future NFIP premium implications. The private policy was put in place with waivers, disclosures and email confirming the insured accepted the risk of moving out of the NFIP for a private flood policy and possibly later incurring penalties.