You hear a lot about the Federal Emergency Management Agency (FEMA) when storms and other natural disasters occur. The agency has a huge role in supporting those affected by natural disasters. But FEMA does not only provide emergency assistance during and following a disaster, it also has its own flood insurance program, the National Flood Insurance Program (NFIP).
According to the NFIP website, “The National Flood Insurance Program (NFIP) aims to reduce the impact of flooding on private and public structures. It does so by providing affordable insurance to property owners and by encouraging communities to adopt and enforce floodplain management regulations. These efforts help mitigate the effects of flooding on new and improved structures. Overall, the program reduces the socio-economic impact of disasters by promoting the purchase and retention of general risk insurance, but also of flood insurance, specifically.”
What It Is
FEMA’s National Flood Insurance Program (NFIP) was created by the Congress of the United States in 1968. It enables property owners in participating communities to purchase insurance protection, administered by the government, against losses from flooding. It also requires flood insurance for all loans or lines of credit that are secured by existing buildings, manufactured homes, or buildings under construction, within NFIP-participating communities.
NFIP is not available to everyone. Your property must be within one of 22,000 participating communities nationwide. As of August 2017, the program insured about 5 million homes.
What Coverage Does NFIP Provide?
NFIP provides flood coverage up to $250,000 for residential and $500,000 for commercial policies (please consult the NFIP website for the most recent information). It also provides an alternative to taxpayer-funded disaster assistance, which averages $5,500 per household. Nevertheless, this often means an SBA loan must be repaid with any underlying mortgage.
Can The Government Require I Buy Flood Insurance?
Most likely if your property is within designated Special Flood Hazard Areas or SFHAs. Under federal law, the purchase of flood insurance is mandatory for all federal or federally-related financial assistance for the acquisition and/or construction of buildings in high-risk flood areas.
Also, if you live in a high-risk Special Flood Hazard Area (SFHA) and have received disaster assistance in the form of a federal grant or loan before, you must buy and maintain flood insurance for as long as you live there.
What is a Special Flood Hazard Area (SFHA)?
SFHAs or high-risk floodplains are land areas that are at high-risk for flooding, according to FEMA’s Flood Insurance Rate Maps.
In high-risk areas, there is at least a 1 in 4 chance of flooding during a 30-year mortgage. Even if you live within a moderate to low risk flood zone (Zones B, C, D, and X Pre- and Post-FIRM) or Non-Special Flood Hazard Area (NSFHA), you might still be at risk. According to NFIP’s website, “over 20 percent of all flood insurance claims come from areas outside of mapped high-risk flood zones.”
How Do I Buy Flood Insurance?
Flood insurance can be bought through an insurance agent or an insurer participating in the NFIP. Check out the list of private insurance companies that sell and service NFIP flood insurance policies.
If your property is currently within a Special Flood Hazard Area, contact us for a free home zone audit. We might be able to reduce or eliminate your flood insurance premiums.