National Flood Insurance Program Policy
Standard homeowners insurance does not cover flooding, and in order to provide affordable flood insurance, in 1968, Congress created the National Flood Insurance Program (NFIP) to help provide a means for property owners and renters to financially protect themselves from the cost of flood damage. The NFIP has three main components: flood plain insurance, flood plain management and flood mapping.
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Administration
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The Federal Emergency Management Agency (FEMA) is responsible for the administration of The National Flood Insurance Program. FEMA works with nearly 90 private insurance companies to ensure that affordable flood insurance is readily available to homeowners, renters and business owners.
Regulations
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The National Flood Insurance program is only available to homeowners whose community participates in the program. In addition to providing affordable insurance, the NFIP also supports local communities in their efforts to reduce the risk and consequences of serious flooding. Before a community can participate in the NFIP, they must agree to adopt and enforce sound floodplain management regulations and ordinances. If your community does not participate in the NFIP, you can encourage participation by petitioning your local government.
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Cost
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Flood insurance can be purchased through participating property and casualty insurance agents. Rates are set and do not differ from company to company or agent to agent. These rates depend on many factors, including the age and construction of your home, as well as the risk zone in which your home is located. Flood insurance protects both the building and contents, but not the land on which the home is built.
Risk
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In order to quantify risk, FEMA conducts a flood hazard analysis study on behalf of the NFIP. The study involves analyzing various hydrologic data. Using the results, FEMA classifiesm and maps land according to the risk of flooding. The risk zones are high risk, moderate to low risk and undetermined risk. Note that there is no such thing as a "no risk" zone.
Requirments
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Homes and buildings in the high-risk area must be covered by flood insurance if they are purchased with a federally insured mortgage. High-risk zones have a greater than 1 percent change of flooding in a given year. Over the course of a 30-year mortgage, the risk of flooding is 26 percent. Homes and businesses located in moderate-to-low risk areas that have mortgages from federally regulated or insured lenders are not required to have flood insurance, however, it is recommended. In the undetermined risk zone, flood hazard analysis has not been completed, therefore the risk is unknown.
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References
Resources
- Photo Credit sugarpalm flood image by Adrian Hillman from Fotolia.com
