A question I frequently encounter when clients visit my website is this: Is this Lloyds Flood insurance as good as the National Flood Insurance Program policy that I already have? Many consumers are a little skeptical when they first come to the realization that the FEMA backed NFIP flood insurance is not the only option they have – especially when they receive a quote that is substantially cheaper in price to what they currently are paying. So, it’s a fair question to ask if Lloyds of London flood insurance holds up to what they need it to be. The simple answer is yes, private Lloyds flood insurance is just as good, if not better coverage than what you can find through the NFIP.
Let me explain…
First of all, the Federal government actually encourages consumers to seek out private flood insurance if possible. In the 2012 re-authorization of the NFIP, there were provisions encouraging the private placement of flood insurance.
Legislation passed the House in the 114th Congress (H.R. 2901) which was intended to loosen requirements on private flood insurance, but it was not taken up by the Senate before the end of the 114th Congress.
Part of this 2012 re-authorization was the Biggert-Waters Flood Insurance Reform Act of 2012, which was meant to ensure the NFIP’s financial stability – and part of this act was to require lenders to accept private flood insurance policies that meet certain criteria.
What are the Lloyds flood insurance requirements?
The following is taken from one of our private Lloyds flood insurance policies and outlines the 6 required criteria for private flood policies:
PRIVATE PLACEMENT FLOOD INSURANCE ENDORSEMENT
It is understood and agreed that, where required, this insurance shall be fully compliant with Federal Law, with regards Private Placement Insurance, applicable to the National Flood Insurance Program (NFIP).
Listed below are the six (6) NFIP vs. Catastrophic Insurance Plan (aka CIP), criteria that conforms to the mandatory flood insurance purchase requirements of the 1994 Reform Act.
1. Licensure:
NFIP: The insurer must be licensed, admitted, or otherwise approved to do business in the jurisdiction where the Building is located by the insurance regulator of that jurisdiction, except as indicated in B. below.
CIP: Coverage for all Catastrophic Insurance Plan policies is provided by Certain Underwriters at Lloyd’s, London. Lloyd’s is a Surplus Lines Carrier. Surplus Lines Carriers are financially stable companies that are regulated by the State Department of Insurance. Surplus Lines Carriers submit financial information, articles of incorporation, list of officers & pay taxes to the state department of insurance in order to conduct business in this state. Each state insurance department maintains a list of approved Surplus Lines insurance companies approved to do business in your state. Certain Underwriters at Lloyds, London is a recognized surplus lines insurer in the United States.
2. Surplus Lines Recognition
(Non-Residential Commercial): NFIP: In the case of Non-Residential commercial property insurance issued under a policy of difference in conditions, multiple peril, all risk, or other blanket coverage, the insurer should be recognized, or not disapproved, as a surplus lines insurer by the insurance regulator of the jurisdiction where the Building is located.
CIP: This is a Flood Policy.
3. Requirement if 45-Day Cancellation/Non-Renewal Notice:
NFIP: The private flood insurance policy should include a requirement for the insurer to give 45 days’ written notice of cancellation or non-renewal to the insured with respect to the flood insurance coverage. The policy should also state that, to be effective, such notice must be mailed to both the insured and the lender or Federal agency lender, and must include information about the availability of flood insurance coverage under the NFIP. The policy should be as restrictive in its cancellation provisions as the SFIP.
CIP: The form provided under the Catastrophic Insurance Plan does have a 45- day cancellation clause, please see below. “We reserve the right to cancel this Policy at any time as provided by its terms, but in such case notice must be given simultaneously to the mortgagee (or Trustee) named herein. If we decide to cancel or not renew this policy, coverage hereunder for the peril of Flood only will continue in effect for the benefit of the mortgagee but only for 45 days from the date that cancellation or non-renewal is sent to the Mortgagee.”
4. Breadth of Policy Coverage:
NFIP: The policy must guarantee that the flood insurance coverage, considering deductibles, exclusions, and conditions offered by the insurer, is at least as broad as the coverage under the SFIP.
CIP: Definitions of Flood provided under the Residential and Non-Residential Policy terms and conditions are broader than those provided by the NFIP standard flood insurance policy. The Residential and Non-Residential Policy also provides options for higher limits than those under the NFIP. The Residential and Non-Residential Policy has specifically incorporated a “Private Placement Flood Insurance Endorsement” which states…. “It is understood and agreed that, where required, this insurance shall be fully compliant with Federal Law, as regards Private Placement Insurance, applicable to the National Flood Insurance Program.”
5. Strength of Mortgage Interest Clause:
NFIP: Lenders must ensure that a mortgage interest clause similar to that contained in the General Condition of the SFIP is contained in this policy.
CIP: “We reserve the right to cancel this Policy at any time as provided by its terms, but in such case notice must be given simultaneously to the mortgagee (or Trustee) named herein. If we decide to cancel or not renew this policy, coverage hereunder for the peril of Flood only will continue in effect for the benefit of the mortgagee but only 45 days from the date that cancellation or non-renew a l is sent to the M o rt ga g ee. ”
6. Legal Recourse:
NFIP: The policy must contain a provision that the insured must file suit within 1 year after the date of written denial of all or part of the claim.
CIP: The policy complies with the NFIP statement mentioned above.
As you can see from the above language, the private Lloyds flood insurance policies meet these criteria and are in fact often stronger than a typical FEMA / NFIP policy- as often times you can purcahse more coverage for the dwelling than the NFIP’s maximum of 250,000 for dwelling coverage.
If you’re interested in switching your flood policy from the NFIP to a private carrier, please fill out the form below and I will get in touch with you.