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FEMA vs. Private Flood Insurance

September 2017 has been a rough one. Hurricane Harvey devastated the greater Houston area, with floods high enough to decimate entire neighborhoods. Hurricane Irma did the same with the Florida Keys. The rest of our state also experienced strong winds and a potable water and gasoline shortage, but nowhere near as bad as what could have been.

As soon as we knew the storm would hit us, Governor Rick Scott declared the entire state to be in a state of emergency. The reason for such a declaration is so that we can receive federal funds and first responders to assist us in recovery efforts.

FEMA is also in a state of emergency

But what happens when the very agency that’s supposed to help us when we’re in dire need is in a state of emergency itself? As we discussed in a previous blog, the Federal Emergency Management Agency (FEMA) is in a precarious financial situation. Their National Flood Insurance Program (NFIP) is in the red due in part because it was poorly organized for the first 40+ years of existence.  It did not allow things like re-insurance or a surplus account.  So if the NFIP made money in a given year, they didn’t save it for the next year should an event were to happen. And it’s finally catching up to them. And even though Floridians still received assistance after Hurricane Irma, it might be practical to look for viable alternatives for the foreseeable future. In addition to Harvey and Irma, we’ve had José, Katia, Lee, and María in the Atlantic; and these hurricanes have tended to be much bigger that what we’ve seen in prior years.

How can we best prepare?

            The first thing you need to do is determine whether you need flood insurance. You can contact us to do that assessment for free. If you don’t need it, 90% of the time, we’ll be able to eliminate your insurance premiums. But if you do need protection, don’t procrastinate; and don’t place all of your eggs in the FEMA basket.

You could obtain private flood insurance. Don’t rely on your homeowners’ or renters’ insurance, because that won’t cover it. While only about 3,000 of the 1.8 million insured Floridians have opted for the private route, by choosing private insurance, you can coverage in excess of the NFIP’s $250,000.00 cap. That being said, don’t let the limit alone be the deciding factor. While you may get a higher cap from a private insurer, the NFIP may cover specific instances that the private insurance might not. So study both policies carefully (and do so before dropping out of the NFIP one, since there’s a 30 day waiting period before the NFIP goes into effect once you enroll in it. So take your time, and evaluate what your family and property really need. And do it now. Don’t wait until the next hurricane warning.

2 thoughts on “FEMA vs. Private Flood Insurance

  1. how is the private market funded and is it backed? do they have reserves?

    is the private market set up to take many of the high risk clients so it helps feman because rates appear to be 1/4 the cost of fema?

    is the private premium low because its just starting but soon the rates will increase?

    if you have fema flood coverage and your grandfathered, then you switch to private and then want to come back to fema, can you keep the grandfathering?

    not sure if I like the private flood insurance, too many unknowns, what is their history?

    also fema is mismanaged and so is most of the usa govt, this comes from not firing lazy employees and so it comes down to management. Its about time every govt employee be evaluated to see if needed and govt agencies should be streamlined, too many overlaps.

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