The NFIP Group Flood Insurance Policy: A Hybrid Between Insurance and
Have you gotten calls about a 3-year flood insurance policy? Or, perhaps, following a large-scale disaster, you may have heard from local media that your state or the Federal Emergency Management Agency (FEMA) is assisting property owners and renters by providing them with insurance coverage.
As you can probably tell, this is not the typical flood insurance policy you usually deal with. For one thing, this “policy” lasts for three years; it is not the traditional single year policy. What you are hearing about is actually a form of disaster assistance offered by your state in coordination with FEMA and the National Flood Insurance Program (NFIP). Called a Group Flood Insurance Policy (GFIP), it is part of the FEMA Individual and Households Program (IHP).
What Is the GFIP?
The GFIP is a 3-year policy that is part of a Master Policy. It is issued in a State's name,
not to the individual property owner. It is offered to owners and renters to provide insurance to protect their property and usually becomes effective 60 days after a Presidentially declared disaster. The GFIP is not available after all disasters.
If a GFIP is being made available for disaster assistance applicants in your area, those
applicants receive a letter from FEMA's IHP notifying them that they may be eligible for this assistance. The policy cost is $600 for the three-year period; it is paid for out of the IHP disaster grant award to help the property owner following a flood loss.
The policy is serviced by the NFIP Direct Servicing Agent and is not sold through private insurers like the typical NFIP flood insurance policy. Once the NFIP Direct receives the full premium payment and the property owner's name and property address, a 30-day waiting period is applied.
Following the waiting period, a letter with an individual certificate, summary of coverage, and addendum of items not covered under the GFIP will be sent to the property owner, and a copy of the certificate is sent to the State. Throughout the course of the policy term, the property owner will receive several letters with updates and notices. The recipient will also receive notices prior to expiration of the GFIP indicating that the policy will expire and that in order to be eligible for future disaster assistance, he or she must purchase his or her own policy through the NFIP and is advised to contact a local insurance agent or call the NFIP Direct.
The GFIP Is Not the Usual NFIP Coverage
The GFIP is not a “full-scale” NFIP flood insurance policy. It provides less coverage than the regular policy: a maximum amount of coverage, currently $31,900, to be used for building, contents, or a combination of both. It also includes a $200 deductible for building and contents coverage. The limit is adjusted every October and is based on the Consumer Price Index (CPI).
It is important to note that in most cases, the amount provided under the GFIP is not enough to insure the property to its full replacement cost value. To remedy this, owners would be advised that they can purchase their own flood insurance policy at any time during the three-year period by contacting a licensed property insurance agent or broker for a quote. Once a SFIP through the NFIP has been purchased and issued, the GFIP is cancelled automatically and becomes null and void.
Federal Requirements for Recipients of Federal Disaster Assistance
When property owners receive financial assistance from the Federal Government following a Presidentially declared disaster, they may be required to purchase flood insurance coverage. This requirement is mandated under the National Flood Insurance Reform Act (NFIRA) of 1994. It is imposed when a building has been damaged and is located in an area that is at high risk of flooding. These high-risk areas are called Special Flood Hazard Areas (SFHA).
The NFIRA requirement applies to insurable buildings and personal property located in the SFHA that has been damaged by the disaster event. Financial assistance can come in the form of Federal disaster assistance grants or loans.
After the GFIP – Next Steps
As an agent, keep in mind, the GFIP is only an interim policy after a major disaster. Once a property owner receives Federal financial disaster assistance, he or she must obtain a flood insurance policy within three years to protect that address. The property owner must inform any buyer of this requirement.
While GFIP is not a policy that you can provide to the property owner, knowing a little background can help you help your neighbor after a disaster—and it can be the road to providing a policy in the next few years.
For further information:
Do you need assistance? If an individual needs help, including getting information about the GFIP or about recovering from a Presidentially declared disaster, he or she can get additional information from the FEMA Disaster Assistance Website at www.disasterassistance.gov.
How do you file a claim under a GFIP? If an individual needs to file a claim under their GFIP, he or she is advised to call 1-800-767-4341.