You have always heard the grass is not always greener on the other side. This applies to many things in life and flood insurance is no exception.
This theory as well as the shiny toy or object syndrome can apply to flood insurance in many ways.
In this podcast we discuss those things and more.
Let's look at flood insurance and greener grass. We hear from people ever day trying to jump ship from the National Flood Insurance Program to private flood insurance. When they get there they are disappointed because they did not address a few things like
- Grandfather policies
- Earned premiums
- FEMA cancellation rules
The first area that many people forget to ask about is grandfathered policies. This is something that is only offered through the National Flood Insurance Program. So what are grandfathered policies?
This is when that green grass can turn to brown grass. You see once you cancel or let coverage lapse on a grandfathered policy there is no getting it back. So many times we have seen customers take out a private flood insurance policy that is a few dollars less than the grandfathered rate, but at renewal it doubles because of flood claims in the area.
They try to go back to the National Flood Insurance Program but now they must accept a standard policy. This could be the difference between a $600 policy and a $2500 policy.
This is why if someone has a grandfathered policy it is rare that we recommend cancelling it. There is more to consider than the current price. You need to consider what happens after a claim, and can you transfer that private flood policy to another buyer?
Something else people don't think about is when they have a bad experience. If you wanted to change auto or home insurance you could at any time with no penalty. However private flood insurance does not work this way as there are what is called earned premium.
Most private companies this ranges from 25-50% this means if you decide to leave after a couple of months you are still out that money.
Something else is running to the other side before checking the FEMA cancellation rules. You see FEMA does not allow property owners to switch to the private market midterm. This is considered cancellation reason 26 duplicate policy outside NFIP.
The shiny toy or object syndrome can play a major role in flood insurance. Trust me I know I get tricked by shiny objects everyday. When it comes to automation in our business I am always trying something new because of some new feature. The problem is at the end of the day I am no better off. This is the exact problem many property owners have when shopping for flood insurance.
You have these companies that offer these fancy online portals for you to access your documents. The problem is the policy actually excludes more than it includes. So when it comes to getting distracted like this make sure to focus on building coverage, contents coverage, living expenses, and long term pricing stability.
So we have talked about how the grass is not always greener and how shiny toy or object syndrome could get your flood insurance in trouble. Maybe you have further questions about picking the right policy?