How Flood Insurance Works
Standard homeowners insurance does not cover floods. In 1968, Congress created the National Flood Insurance Program, or NFIP, to provide homeowners with federally-backed financial protection while reducing the disaster recovery burden on the federal government.
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Mandatory Policies
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Property owners of structures located within high- and coastal high-risk zones in NFIP participating communities must purchase flood insurance if they carry a federally backed mortgage. Properties in these zones have at least a 1 percent chance of flooding each year. Those on the coast have an additional threat of damage from storm waves.
Optional Policies
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Property owners in low- to moderate-risk and undetermined risk zones have the option to purchase NFIP flood insurance but are not required to do so. These areas fall outside the 100 year floodplain or are in areas where FEMA has yet to conduct flood-hazard analysis.
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Legal Exceptions
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FEMA conducts flood-hazard analysis on every area of the country and creates maps to illustrate within which flood zone each property lies. Due to map scale limits or topographic definition on source maps, some areas may appear to reside in a flood zone although the parcel is on natural ground at or above the base flood elevation. The use of earthen fill during construction may have raised some areas to the base flood elevation. In these cases, the owner may apply to FEMA for a Letter of Map Amendment which will exempt them from the federal mandatory flood insurance purchase requirement.
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References
- Photo Credit flood image by dinostock from Fotolia.com
