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FEMA and NFIP Demystified – FAQ’s FEMA, NFIP, SFHA Your Questions Answered


NFIP Background and General Questions/Answers

Basic Policy Stuff: Questions/Answers

But I Don’t Live In A High-Risk Zone

What’s Covered (And What’s Not)

Mandatory Coverage And Other Legal Mumbo Jumbo

For Serious Flood Insurance Nerds Only

NFIP Background and General Questions/Answers

Created by the U.S. Congress, the NFIP is a federal program designed to a) mitigate future flood losses through sound, community-enforced building and zoning ordinances and b) provide access to affordable, federally-backed flood insurance protection for property owners. The NFIP is an insurance alternative to disaster assistance (to meet the escalating costs of repairing flood-caused damage to buildings and their contents).

Participation in the NFIP is based on an agreement between local communities and the federal government – stating if a community will adopt and enforce a floodplain management ordinance to reduce future flood risks to new construction in Special Flood Hazard Areas (SFHAs), the federal government will make flood insurance available within that community as a financial protection against flood losses.

Why did Congress create the NFIP?

For decades, national response to flood disasters was generally limited to constructing flood-control works (dams, levees, seawalls, etc.) and providing disaster relief to flood victims. However, this approach failed to reduce losses or discourage unwise development and, in some cases, may have actually encouraged questionable development. And due to its seasonal, high-risk nature, insurance companies were unable to provide affordable flood insurance coverage.

In light of mounting flood losses and escalating costs of disaster relief to U.S. taxpayers, the Congress created the NFIP in 1968. The intent was to reduce future flood damage through community floodplain management ordinances, and provide protection for property owners against potential losses through an insurance mechanism requiring a paid premium.

How was the NFIP established and who administers it?

The U.S. Congress established the NFIP on August 1, 1968, with the passage of the National Flood Insurance Act (NFIA) of 1968. The NFIP was broadened and modified with the passage of the Flood Disaster Protection Act of 1973 and other legislative measures. It was further modified by the National Flood Insurance Reform Act (NFIRA) of 1994 and the Flood Insurance Reform Act (FIRA) of 2004. The NFIP is administered by the Federal Emergency Management Agency (FEMA), a component of the U.S. Department of Homeland Security (DHS).

What is a Flood Insurance Rate Map (FIRM)?

A Flood Insurance Rate Map (FIRM) is an official map of a community on which FEMA has delineated both the special hazard areas and risk premium zones applicable to that community.

What is a Special Flood Hazard Area (SFHA)?

In support of the NFIP, FEMA identifies flood hazard areas throughout the United States and its territories. Most areas of flood hazard are commonly identified on Flood Insurance Rate Maps (FIRMs). Areas not yet identified by a FIRM may be mapped on Flood Hazard Boundary Maps (FHBMs). Several areas of flood hazards are identified on these maps; one of these areas is the Special Flood Hazard Area (SFHA).

The SFHA is a high-risk area defined as any land that would be inundated by a flood having a 1-percent chance of occurring in a given year (also referred to as the base flood). The high-risk area standard constitutes a reasonable compromise between a) the need for building restrictions to minimize potential loss of life and property and b) the economic benefits derived from floodplain development. Development may take place within an SFHA, provided it complies with local floodplain management ordinances (which must meet the minimum federal requirements). Flood insurance is required for all insurable structures within high-risk areas to protect federal financial investments/assistance used for acquisition and/or construction purposes within communities participating in the NFIP.

How can a property owner determine whether or not their property is in a Special Flood Hazard Area (SFHA)?

FEMA provides mapped communities with a single paper map of their community (usually kept in community planning or building permit departments where they should be available for review). Digital flood maps are also viewable on FEMA’s Map Information eXchange (FMIX) website at Property owners can contact their insurance agent, who usually has access to FEMA maps or to a Flood Zone Determination service.

What is a flood?

Flood is defined in the Standard Flood Insurance Policy (SFIP) in part, as:

A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from overflow of inland or tidal waters, from unusual and rapid accumulation or runoff of surface waters from any source, or from mudflow.

Doesn’t my homeowners’ insurance policy already cover flooding?

No. Flood damage is not typically covered by homeowners’ insurance.

If my home is flooded, won’t federal disaster assistance pay for my damages?

Not necessarily. Federal disaster assistance typically comes in the form of a low-interest loan to help cover flood damage – not compensation for your losses. Even then, those loans are only available when the President formally declares a disaster and the funds must be repaid along with any existing mortgage.

Who may purchase a flood insurance policy?

NFIP coverage is available to all owners of eligible property (a building and/or its contents) located in a community participating in the NFIP. Owners and renters may insure their property against flood loss. Owners of buildings in the course of construction, condominium associations and owners of residential condominium units in participating communities all may purchase flood insurance.

Condominium associations may purchase insurance coverage on a residential building – including all units and its commonly-owned contents under the Residential Condominium Building Association Policy (RCBAP). The unit owner may separately insure personal contents (as well as obtain additional building coverage under the Dwelling Form) as long as the unit owner’s share of the RCBAP and his/her added coverage do not exceed the statutory limits for a single-family dwelling. The owner of any condominium unit in a non-residential condominium building may purchase only contents coverage for that unit.

What types of property may be insured against flood loss?

Insurance may be written on any building eligible for coverage with two or more outside rigid walls and a fully-secured roof that is affixed to a permanent site. Eligible buildings must resist flotation, collapse and lateral movement, and the structure must be located in a community that participates in the NFIP.

Manufactured (i.e., mobile and travel trailers without wheels) homes that are affixed and anchored to a permanent foundation are eligible for coverage.

Contents coverage for personal belongings located within an eligible building can also be purchased.

How much flood insurance coverage is available?

Coverage limits for a standard flood insurance policy are:

Coverage Type Coverage Limit
One- to four-family structure $250,000
One- to four-family home contents $100,000
Other residential structures $250,000
Other residential contents $100,000
Business structure $500,000
Business contents $500,000
Renter contents $100,000

Can I get flood insurance if I’m renting a property?

If you live in a community that participates in the NFIP, you may obtain flood insurance to cover the contents of your home or business.

What types of property are NOT insurable under the NFIP?

Buildings entirely over water or principally below ground, gas/liquid storage tanks, animals, birds, fish, aircraft, wharves, piers, bulkheads, growing crops, shrubbery, land, livestock, roads, machinery or equipment in the open – and most motor vehicles – are not insurable through the NFIP.

How is flood insurance obtained?

Once a community joins the NFIP, a policy may be purchased from a) any licensed property insurance agent / broker in good standing in the state in which the agent is licensed or b) through any agent representing a Write Your Own (WYO) Company (including an employee of the company authorized to issue the coverage). The agent completes the flood insurance application, obtains the proper supporting documentation required and determines the rates for establishing the flood insurance premium.

Where can I learn more about the maps used to determine my relative risk level?

FEMA publishes maps indicating a community’s flood hazard areas and the degree of risk in those areas. Flood insurance maps usually are on file in a local repository in the community, such as the planning and zoning or engineering offices in the town hall or the county building.

You may also order maps online or by writing, phoning, or faxing a request to the FEMA Map Assistance Center . There is a minimal charge for maps for most users.

Why is my mortgage lender requiring me to purchase flood insurance?

Under the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994, lenders are mandated to require flood insurance be purchased by property owners acquiring loans from federally regulated, supervised or insured financial institutions for the acquisition or improvement of land, facilities or structures located within or to be located within an SFHA.

How are flood insurance premiums calculated?

A number of factors are considered, including: coverage amount, deductible amount, flood zone, design (foundation type), location and age of the building and building occupancy. For buildings in SFHAs built after the community entered the flood program (Post-FIRM), the elevation of the building in relation to the Base Flood Elevation (BFE) is also a factor in determining the premium.

How many buildings or locations (and their contents) may be insured on each policy?

Only one building (and its contents) may be insured per policy.

What is the flood insurance policy term?

One year

What is the waiting period for flood insurance to become effective?

There is a 30-day waiting period before flood coverage goes into effect. The effective date of a new policy will be 12:01 a.m., local time, on the 30th calendar day after the application date and the presentment of premium.

How does a valid policyholder file a claim for flood loss?

The policyholder should immediately report any flood loss to the insurance company or agent who wrote the policy. A claims adjuster will be assigned the loss and the policyholder must file a “proof of loss” within 60 days of the date of loss. A policyholder whose policy is with a WYO Company must follow that company’s claim procedures, and the 60-day time limit for proof-of-loss filing remains the same.

Is it possible to purchase more coverage than the NFIP offers?

Many private insurance companies offer Excess Flood Protection, which provides limits over and above those of the NFIP. NationalFloodExperts can help you with this.

Can I get a discount on my flood insurance premium?

It’s possible that you qualify for a discount based on your community’s participation and status in the Community Rating System program.

How does a valid policyholder file a flood loss claim?

The policyholder should immediately report any flood loss to the insurance company or agent who wrote the policy. A claims adjuster will be assigned the loss and the policyholder must file a “proof of loss” within 60 days of the date of loss. A policyholder whose policy is with Insurance Company must follow that company’s claim procedures, and the 60-day time limit for proof-of-loss filing remains the same.

Can flood insurance be canceled at the request of the insured with a refund of premium?

In some cases. For example, if the policyholder sold the property and no longer has an insurable interest in it, the policy can be canceled with a pro-rated return.

However, due to the seasonal nature of flooding (and to protect the lender’s interest), there are limited valid cancellations reasons. These valid reasons – and the proper procedures and documentation required to cancel a policy – are outlined in the NFIP manual that is provided with an insurance policy.

Is there a grace period for renewing an NFIP policy after expiration?

All policies expire at 12:01 a.m. on the last day of the policy term.

However, coverage remains in force for 30 days after the expiration of the policy, and claims for losses that occur during this period will be honored (provided that the full renewal premium is received within 30 days of the policy expiration date).

Coverage also remains in force for the benefit of any mortgagee, but only for 30 days after the mortgagee is notified of the cancellation or expiration.

I live in a low-risk flood zone. Do I really need flood insurance?

It’s always a smart idea to buy flood insurance even when living in a moderate- or low-risk area. People outside of high-risk areas file over 20% of NFIP claims and receive one-third of disaster assistance for flooding. When it’s available, disaster assistance is typically a loan you must repay with interest.

Do I need flood insurance even though my community has never been flooded?

Flooding occurs in moderate-to-low risk areas as well as high-risk areas. Poor drainage systems, broken water mains and rapid accumulation of rainfall/snowmelt can all result in flooding. Hillside properties can be damaged by mudflow (covered under the Standard Flood Insurance Policy). Structures located in high-risk flood areas have a 26% chance of suffering flood damage during the term of a 30-year mortgage. In a high-risk area, your home is more than twice as likely to be damaged by a flood as by fire. This is why flood insurance is required by law for buildings in high-risk flood areas as a condition of receiving a mortgage from a federally- regulated or insured lender.

Is there a lower-cost policy for buildings located in moderate-to-low risk areas?

Yes. The Preferred Risk Policy is available in moderate-to-low risk areas for as little as $129 per year. This policy offers multiple coverage combinations for both buildings and contents (or contents-only, for renters) that are located in moderate-to-low risk areas (B, C, and X zones). Preferred Risk policies are available for residential or non-residential buildings also located in these zones (that meet eligibility requirements based on the building’s entire flood loss history).

Does flood insurance cover flood damage caused by hurricanes, rivers or tidal waters?

Yes. Flood insurance covers overflow of inland or tidal waters and unusual and rapid accumulation or runoff of surface waters from any source. However, the flood must be a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is yours).


Is flood damage caused by wind-driven rain covered?

No. When rain enters through a wind-damaged window, door or hole in a wall or roof, the NFIP considers the resulting puddles and damage to be windstorm-related, not flood-related. Although flood insurance specifically excludes wind and hail damage, the good news is that most homeowners’ insurance provides such coverage.

What coverage is available for basements and enclosed areas beneath the lowest elevated floor of an elevated building located in an SFHA built after the community entered the NFIP (Post-FIRM)?

Coverage is provided for foundation elements, including posts, pilings, piers or other support systems for elevated buildings. Coverage also is available for basement and enclosure utility connections, as well as for certain mechanical equipment necessary for the habitability of a building (furnaces, water heaters, clothes washers/dryers, food freezers and their contents, air conditioners, heat pumps, electrical junctions and circuit breaker boxes). Finished structural elements (paneling and linoleum) and contents items (rugs and furniture) are not covered. The SFIP has a complete list of covered elements and equipment.

What qualifies as a basement?

The NFIP’s definition of “basement” includes any part of a building where all sides of the floor are located below ground level. Even though a room may have windows and constitute living quarters, it is still considered a basement if the floor is below ground level on all sides.

Are losses from land subsidence, sewer backup or seepage of water covered?

Under certain circumstances. For example, the NFIP pays for losses from subsidence of land along a lakeshore (or similar body of water) that resulted from the erosion or undermining of the shoreline caused by waves or currents of water exceeding cyclical levels that led to a flood. All other land subsidence is excluded.

Unless there is a general condition of flooding in the area (and this flood is the proximate cause of sewer or drain backup, sump pump discharge or overflow or water seepage), the NFIP does not insure for direct physical loss caused directly or indirectly by any of the following:

  • Backups through sewers or drains
  • Discharges or overflows from a sump, sump pump or related equipment
  • Seepage or leaks on or through the covered property

Are the costs of preventive measures covered under the SFIP?

In some cases. When an insured building is in imminent flooding danger, reasonable expenses incurred for the removal (and subsequent return) of insured property to a safe location are reimbursed up to $1,000 – and the purchase of sandbags and sand to fill them, plastic sheeting and lumber used in connection with them, pumps, fill for temporary levees and wood will be reimbursed up to $1,000. No deductible is applied to this coverage.

Do NFIP policies provide coverage at replacement cost?

Replacement cost coverage is available for a single-family dwelling that is the policyholder’s principal residence. Under insured the Dwelling Form, this must be insured for at least 80% of the building’s total insurable value at the time of the loss (or the maximum amount of insurance available under the Program). Replacement cost coverage does not apply to manufactured (mobile) homes smaller than the dimensions specified in the policy.

Losses are adjusted on a replacement cost basis for residential condominium buildings insured under the Residential Condominium Building Association Policy (RCBAP). However, coverage amounts that are less than 80% of the building’s full replacement cost value (RCV) at the time of loss will be subject to a coinsurance penalty.

Building losses under the General Property Form are adjusted on an actual cash value basis.

Contents losses are adjusted on an actual cash value basis. Actual cash value means the replacement cost of an insured item at the time of loss (less the value of physical depreciation of said item).

Does the Standard Flood Insurance Policy (SFIP) provide additional living expenses if the insured dwelling is flood damaged and inhabitable during repairs?

No. The policy covers only direct physical flood damage to the dwelling and does not provide for additional living expenses.

Is the purchase of flood insurance mandatory?

The Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 mandate that federally-regulated, supervised or insured financial institutions and Federal Agency lenders require flood insurance for buildings located in a participating NFIP community and in an SFHA. As part of their own risk-management process, some financial institutions may require flood insurance for properties outside the SFHA.

Why is there a requirement to purchase flood insurance in communities that haven’t suffered flooding in many years (or ever)?

A major purpose of the NFIP is alerting communities to the danger of flooding and assisting them in reducing potential property losses from flooding. Historical flood data are only one element used in determining a community’s flood risk. Critical determinations may also be made by evaluating the community’s rainfall and river-flow data, topography, wind velocity, tidal surge, flood-control measures, development (existing and planned), community maps and other data. Over time, additional development – or changes in these factors – can alter the flood risk and flood maps may be revised.

Why does my mortgage lender require flood insurance?

The purchase of flood insurance is a legal requirement to obtaining federal or federally-related financial assistance for the acquisition and/or construction of buildings in high-risk flood areas (Special Flood Hazard Areas or SFHAs).

If the property is in a moderate-to-low risk area, federal law does not require flood insurance; however, your lender may still require it. If the maps are revised and your property is now in a high-risk area, your lender will notify you that you must now purchase flood insurance for the life of the loan.

Are lenders required to escrow flood insurance payments?

Yes. When a lender, its servicer or a Federal Agency lender requires the escrow of taxes, insurance premiums, fees or any other charges for a loan secured by improved residential real estate or mobile homes, it shall also require the escrow of all premiums and fees for any flood insurance. This requirement applies to loans made, increased, extended or renewed on or after October 1, 1996.

Requiring lenders to escrow for flood insurance premiums improves compliance with flood insurance requirements by ensuring that homeowners located in Special Flood Hazard Areas obtain and maintain flood insurance for the life of the loan.

Is there a minimum coverage requirement for a flood insurance policy?

There is no minimum coverage requirement if coverage is being purchased voluntarily.

However, if coverage is being purchased as the result of a lender requirement (mandatory purchase requirement), the amount of flood insurance required must be at least equal to the lesser of a) the outstanding principal balance of the loan, b) the maximum amount available under the NFIP or c) the total insurable value of the property.

In their loan documents, some lenders reserve the right to require the purchase of flood insurance above the amount required by law. If so, they may stipulate the amount of coverage must be as high as the building’s replacement cost value.

I live in a high-risk risk area. After my home was damaged in a flood, I received federal disaster assistance. Do I need to purchase flood insurance now?

Yes. If you live in an SFHA and received disaster assistance in the form of a federal grant or loan, you must now cover the building with flood insurance for as long as you own it. Should you sell the building, you are required to inform the new owner of the necessity to purchase and maintain flood insurance. Failure to carry flood insurance could result in the denial of future federal disaster assistance.

What is Increased Cost of Compliance (ICC) coverage?

When a flood damages your property, the law may require you to bring your home up to community and/or state floodplain management standards. If you have NFIP insurance – and your home has been declared substantially damaged by your community – ICC coverage is provided to cover up to $30,000 of the cost to elevate, flood proof, demolish or relocate your property. ICC coverage is in addition to the coverage you receive to repair flood damages; however, the total payout on a policy may not exceed $250,000 for residential buildings and $500,000 for non-residential buildings.

Under the SFIP, Increased Cost of Compliance (ICC) coverage provides for the payment of a claim to help offset the cost to comply with state or community floodplain management laws or ordinances (from a flood event in which the building has been declared substantially damaged or repetitively damaged). When an insured building is damaged by a flood and the state or community declares the building to be substantially or repetitively damaged, ICC coverage helps pay to elevate, flood-proof, demolish or relocate the building (up to a maximum benefit of $30,000). This coverage is in addition to the building coverage for the repair of actual physical flood damages under the SFIP.

Is there a limit a policyholder may collect under ICC coverage?

The total amount the policyholder receives for combined physical structural damage from flood and ICC is always capped by the maximum limit of coverage established by the U.S. Congress. The maximum amount collectible for both ICC and physical damage from flood for a single-family dwelling is $250,000.

Is ICC premium included in all Standard Flood Insurance Policies?

Yes, but not all buildings are eligible for ICC coverage. To be eligible, a building must be declared substantially damaged and there must be mitigation activities to reduce the building’s exposure to future flood damage.

When a building is substantially improved or damaged, can its FIRM be grandfathered its originally-constructed rate?

No. If a building is substantially improved or damaged, the FIRM in effect at the time of improvement or damage must be used for rating.

When a property’s flood zone changes from a non–Special Flood Hazard Zone (SFHA) to an SFHA as a result of a FIRM update, can the property continue to be rated using the PRP?

Yes. Because flood zone revisions on updated FIRMs have resulted in financial challenges for many homeowners, FEMA has implemented a measure providing financial relief by delaying the applicability of the SFHA standard rating for two years. Buildings newly mapped into an SFHA (by a map effective on or after October 1, 2008), are eligible for the PRP for two years beginning on January 1, 2011 (or the map change effective date, whichever is later). The building must also meet the PRP loss history requirements. At the end of the extended PRP eligibility period, the policy is renewed as a standard-rate policy and may be eligible for grandfathering on a standard-rate policy.

Are there grandfather rules allowing policyholders to maintain the current rating despite a map revision placing their property in a higher-rated flood zone?

Yes. To recognize policyholders who have built in compliance with the FIRM and/ or remained loyal customers of the NFIP by maintaining continuous coverage, FEMA allows such policyholders to benefit in that building’s rating. This means the insured has the option of a) using the current rating criteria for that building or b) having the premium rate determined by the BFE and/or flood zone on a previous FIRM that was in effect when the building was originally constructed (for those built in compliance) or when coverage was first obtained (for those with continuous coverage).

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