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Report: National Flood Insurance Program policyholders paying much less than what they could bePosted On Thu, April 28, 2011
While some people may be frustrated with the national Flood Insurance Program, a new study is indicating that homeowners who participate in it are paying significantly less than what they would be paying if they had to use a private insurer.
According to the Property Casualty Insurers Association of America, policyholders in the NFIP are paying about one-half the true risk cost, with some spending as little as one-third the true cost.
In a statement, Robert Gordon, PCI's vice president of policy development and research, said he's pleased the program has been a cost saver for so many people.
PCI said that unlike private insurers, which use catastrophe risk models to evaluate rates, the government program determines premiums based on administrative cash-flow losses.
Though thousands of communities participate in the NFIP, record flooding in the plains and parts of the Midwest will likely have more people buying coverage from private home insurance companies. Homeowners may prefer private insurers over the government flood insurance program because they are able to cover more in potential losses.
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