Introduction to the NFIP

1. What is the National Flood Insurance Program (NFIP)?

The NFIP is a Federal program enabling property owners in participating communities to purchase insurance protection against losses from flooding. This insurance is designed to provide an insurance alternative to disaster assistance to meet the escalating costs of repairing damage to buildings and their contents caused by floods.

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

2. Why was the NFIP established by Congress?

For decades, the national response to flood disasters was generally limited to constructing flood-control works such as dams, levees, sea-walls, and the like, and providing disaster relief to flood victims. This approach did not reduce losses, nor did it discourage unwise development. In some instances, it may have actually encouraged additional development. To compound the problem, the public generally could not buy flood coverage from insurance companies, and building techniques to reduce flood damage were often overlooked.

In the face of mounting flood losses and escalating costs of disaster relief to the general taxpayers, the U.S. Congress created the NFIP. 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 that requires a premium to be paid for the protection.

3. How was the NFIP established and who administers it?

The U.S. Congress established the NFIP with the passage of the National Flood Insurance Act 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 of 1994, signed into law on September 23, 1994. The NFIP is administered by the Federal Insurance Administration (FIA), and the Mitigation Directorate (MT), components of the Federal Emergency Management Agency (FEMA), an independent Federal agency.

4. What is a Special Flood Hazard Area (SFHA)?

In support of the NFIP, FEMA has undertaken a massive effort of flood hazard identification and mapping to produce Flood Hazard Boundary Maps (FHBMs), Flood Insurance Rate Maps (FIRMs), and Flood Boundary and Floodway Maps (FBFMs). Several areas of flood hazards are commonly identified on these maps. One of these areas is the Special Flood Hazard Area (SFHA), which is defined as an area of land that would be inundated by a flood having a 1-percent chance of occurring in any given year (also referred to as the base or 100-year flood). The 1-percent annual chance standard was chosen after considering various alternatives. The standard constitutes a reasonable compromise between the need for building restrictions to minimize potential loss of life and property and the economic benefits to be derived from floodplain development. Development may take place within the SFHA, provided that development complies with local floodplain management ordinances, which must meet the minimum Federal requirements. Flood insurance is required for insurable structures within the SFHA to protect Federal financial investments and assistance used for acquisition and/or construction purposes within communities participating in the NFIP.

5. 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 normally dry land areas from overflow of inland or tidal waters or from the unusual and rapid accumulation or runoff of surface waters from any source.

6. What is the NFIP’s Write Your Own (WYO) program?

The Write Your Own (WYO) Program, begun in 1983, is a cooperative undertaking of the insurance industry and the FIA. The WYO Program allows participating property and casualty insurance companies to write and service the Standard Flood Insurance Policy in their own names. The companies receive an expense allowance for policies written and claims processed while the Federal Government retains responsibility for underwriting losses. The WYO Program operates within the context of the NFIP, and is subject to its rules and regulations.

The goals of the WYO Program are:

n Increase the NFIP policy base and the geographic distribution of policies;

n Improve service to NFIP policyholders through the infusion of insurance industry knowledge; and

n Provide the insurance industry with direct operating experience with flood insurance.

As of October 1996, approximately 90 insurance companies had signed arrangements with FIA to sell and service flood insurance under their names.

7. Do the state insurance regulators have any jurisdiction over the NFIP in their respective states?

As established by the U.S. Congress, the sale of flood insurance under the NFIP is subject to the rules and regulations of FIA. FIA has elected to have State-licensed insurance companies’ agents and brokers sell flood insurance to consumers. State regulators hold the insurance companies’ agents and brokers accountable for providing NFIP customers with the same standards and level of service that the states require of them in selling their other lines of insurance.

Private insurance companies participating in the Write Your Own (WYO) program must be licensed and regulated by States to engage in the business of property insurance in those States in which they wish to sell flood insurance.

8. How does the NFIP benefit property owners? Taxpayers? Communities?

Through the NFIP, property owners in participating communities are able to insure against flood losses. By employing wise floodplain management, a participating community can protect its citizens against much of the devastating financial loss resulting from flood disasters. Careful local management of development in the floodplains results in construction practices that can reduce flood losses and the high costs associated with flood disasters to all levels of government.

9. What is the definition of a community?

A “community,” as defined for NFIP’s purposes, is any State, area, or political subdivision; any Indian tribe, authorized tribal organization, or Alaska native village, or authorized native organization that has the authority to adopt and enforce floodplain management ordinances for the area under its jurisdiction. In most cases, a community is an incorporated city, town, township, borough, or village, or an unincorporated area of a county or parish. However, some States have statutory authorities that vary from this description.

10. Why is participation in the NFIP on a community basis rather than on an individual basis?

The National Flood Insurance Act of 1968 allows FIA to make flood insurance available only in those areas where the appropriate public body has adopted adequate floodplain management regulations for its flood-prone areas. Individual citizens cannot regulate building or establish construction priorities for communities. Without community oversight of building activities in the floodplain, the best efforts of some to reduce future flood losses could be undermined or nullified by the careless building of others. Unless the community as a whole is practicing adequate flood hazard mitigation, the potential for loss will not be reduced sufficiently to affect disaster relief costs. Insurance rates also would reflect the probable higher losses that would result without local flood-plain management enforcement activities.

11. Is community participation mandatory?

Community participation in the NFIP is voluntary (although some States require NFIP participation as part of their floodplain management program). Each identified flood-prone community must assess its flood hazard and determine whether flood insurance and floodplain management would benefit the community’s residents and economy. However, a community that chooses not to participate within 1 year after the flood hazard has been identified and an NFIP map has been provided is subject to the ramifications explained in the answer to Question 20.

A community’s participation status can significantly affect current and future owners of property located in Special Flood Hazard Areas (SFHAs). The decision should be made with full awareness of the consequence of each action.

12. What is the Emergency Phase of the NFIP?

The Emergency Phase of the NFIP is the initial phase of a community’s participation in the NFIP and was designed to provide a limited amount of insurance at less than actuarial rates. A community participating in the Emergency Phase either does not have an identified and mapped flood hazard or has been provided with a Flood Hazard Boundary Map (FHBM), and the community is required to adopt limited floodplain management requirements to control future use of its floodplains. About one percent of the 19,000 communities participating in the NFIP remain in the Emergency Phase, and FEMA plans to convert all communities to the Regular Phase of the NFIP as quickly as possible. For additional information on mapping, please refer to the “Flood Hazard Assessment and Mapping Requirements” section of this booklet

13. What is the Regular Phase of the NFIP?

A community participating in the Regular Phase of the NFIP is usually provided with a Flood Insurance Rate Map (FIRM) and a detailed engineering study, termed a Flood Insurance Study (FIS). (Additional information on FIRMs and FISs is provided in the “Flood Hazard Assessment and Mapping Requirements” section of this booklet.) Under the Regular Phase of the NFIP, more comprehensive floodplain management requirements are imposed on the community in exchange for higher amounts of flood insurance coverage.

14. What happens when a community does not enforce its floodplain management ordinances?

Communities are required to adopt and enforce a floodplain management ordinance that meets minimum NFIP requirements. Communities that do not enforce these ordinances can be placed on probation or suspended from the program. This is done only after FEMA has provided assistance to the community to help it become compliant.

15. What is probation?

Probation is the formal notification by FEMA to a community that its floodplain management program does not meet NFIP criteria. It is an action authorized under Federal regulations.

16. When can a community be placed on probation?

A community can be placed on probation 90 days after FEMA provides written notice to community officials of specific deficiencies. Probation generally is imposed only after FEMA has consulted with the community and has not been able to resolve deficiencies. The FEMA Regional Director has the authority to place communities on probation.

17. How long will probation last?

Probation may be continued for up to 1 year after the community corrects all Program deficiencies and remedies all violations to the maximum extent possible.

18. What penalties are imposed when a community is placed on probation?

An additional $50 charge is added to the premium for each policy sold or renewed in the community. The additional charge is effective for at least 1 year after the community’s probation period begins. The surcharge is intended to focus the attention of policyholders on the community’s non-compliance to help avoid suspension of the community, which has serious adverse impacts on those policyholders. Probation does not affect the availability of flood insurance.

19. What is suspension?

Suspension of a participating community (usually after a period of probation) occurs when the community fails to solve its compliance problems or fails to adopt an adequate ordinance. The community is provided written notice of the impending suspension and granted 30 days in which to show cause why it should not be suspended. Suspension is imposed by the Associate Director, Mitigation Directorate, FEMA. If suspended, the community becomes non-participating and flood insurance policies cannot be written or renewed. Policies in force at the time of suspension continue in force for the policy term. Three-year policies remain in force until the next annual anniversary date of the policy.

20. What happens if a community does not participate in the NFIP?

Flood insurance under the NFIP is not available within that community. Furthermore, Section 202(a) of Public Law 93-234, as amended, prohibits Federal officers or agencies from approving any form of financial assistance for acquisition or construction purposes in a Special Flood Hazard Area (SFHA). For example, this would prohibit loans guaranteed by the Department of Veterans Affairs, insured by the Federal Housing Administration, or secured by the Rural Housing Services. Under Section 202(b) of Public Law 93-234, if a Presidential declared disaster occurs as a result of flooding in a non-participating community, no Federal financial assistance can be provided for the permanent repair or reconstruction of insurable buildings in SFHAs. Eligible applicants may receive those forms of disaster assistance that are not related to permanent repair and reconstruction of buildings.

If the community applies and is accepted into the NFIP within 6 months of a Presidential disaster declaration, these limitations on Federal disaster assistance are lifted.

21. Explain the discounts on premiums that can be obtained in communities that qualify for the Community Rating System (CRS) because they have floodplain management programs that go beyond the minimum requirements to participate in the NFIP.

The NFIP’s Community Rating System (CRS) recognizes community efforts beyond the NFIP minimum standards by reducing flood insurance premiums for the community’s property owners. The discounts may range from 5 to 45 percent. The discounts provide an incentive for new flood mitigation, planning and preparedness activities that can help save lives and protect property in the event of a flood.

22. What procedures must be followed for a community to participate in the Community Rating System?

Participation in the CRS is voluntary. A community in compliance with the rules and regulations of the NFIP may apply. The community’s Chief Executive Officer must appoint a CRS coordinator to handle the application work and serve as the liaison between the community and FEMA. The first step in the application process is for the community to obtain a copy of the CRS Coordinator’s Manual, which describes the program and gives details on the eligible activities. The CRS coordinator should fill out and submit an application for participation in the CRS. The CRS will verify the information and arrange for flood insurance premium discounts.

23. How can a community acquire the CRS Coordinator’s Manual and other information describing the program?

The CRS Coordinator’s Manual, additional CRS publications, or software may be ordered by writing, calling, or faxing a request to the NFIP/CRS. The address, phone, and fax numbers are listed in the NFIP Address and Telephone Directory at the end of this booklet. All publications are free, and the computer software for completing the application is also available at no charge.

Flood Insurance Information for Prospective Buyers

24. Who may purchase a flood insurance policy?

NFIP coverage is available to all owners of insurable property (a building and/or its contents) in a community participating in the NFIP. Owners and renters may insure their personal property against flood loss. Builders 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 a non-residential condominium unit may purchase only contents coverage for that unit.

25. How can property owners or renters find out if they are eligible to purchase flood insurance?

NFIP coverage is available only in participating communities. Almost all of the nation’s communities with serious flooding potential have joined the NFIP. To learn if a community is participating in the NFIP, contact a property insurance agent, a broker, or a community official, or call the NFIP toll-free number 1-800-427-4661.

26. How can a property owner determine if the property is in a Special Flood Hazard Area (SFHA)?

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. A property owner may consult these maps to find out if the property is in an SFHA. A FEMA publication entitled “Guide to Flood Maps” will also help individuals identify particular properties. A toll-free telephone number and mailing address for the FEMA Map Service Center are listed in the NFIP Address and Telephone Directory at the back of this booklet, and may be used to order maps. Delivery is usually within 2 to 4 weeks. There is a minimal charge for maps for most users, so it is advisable to call for detailed information.

27. What types of property may be insured against flood loss?

Almost every type of walled and roofed building that is principally above ground and not entirely over water may be insured if it is in a participating community. In most cases, this includes manufactured (i.e., mobile) homes anchored to permanent foundations, but does not include travel trailers or converted buses or vans. Contents of insurable walled and roofed buildings also may be insured under separate coverage.

28. What kinds of property are not insurable under the NFIP?

Buildings entirely over water or principally below ground, gas and liquid storage tanks, animals, birds, fish, aircraft, wharves, piers, bulkheads, growing crops, shrubbery, land, livestock, roads, machinery or equipment in the open, and motor vehicles are not insurable. Most contents and finishing materials located in a basement or in enclosures below the lowest elevated floor of an elevated building constructed after the FIRM became effective are not covered. (See “Coverage” section for coverage limitations in basements and below lowest elevated floors.) Information on the insurability of any special property may be obtained by contacting a property insurance agent or a broker.

29. Are there certain buildings that cannot be covered?

Flood insurance is not available for buildings that the Administrator of FIA determines have been declared by a State or local zoning authority or other authorized authority to be in violation of State or local floodplain management regulations or ordinances. No new policies can be written to cover such buildings; nor can an existing policy be renewed.

New construction or substantially improved structures located within a designated Coastal Barrier Resources System (CBRS) are not eligible for flood insurance, but existing structures that pre-date CBRS designation are eligible for flood insurance coverage. These areas are located in nearly

400 communities on the Atlantic and Gulf coasts and along the Great Lakes shores, and are delineated on the communities’ flood maps. If, at the time of a loss, it is determined the building is located in a CBRS area, the claim will be denied, the policy canceled, and the premium refunded. (See Questions 44 and 45 for a description of CBRS.)

30. How is flood insurance purchased?

After a community joins the NFIP, a policy may be purchased from any licensed property insurance agent or broker who is in good standing in the State in which the agent is licensed or through any agent representing a Write Your Own (WYO) company, including an employee of the company authorized to issue the coverage.

The steps leading to the purchase of a flood insurance policy are:

n A property owner or renter perceives a risk of flooding to an insurable building or its contents and elects to purchase flood insurance, or a lender making, renewing, increasing, or extending a loan, or at any time during the term of the loan, informs the builder or potential buyer that the building is in a Special Flood Hazard Area (SFHA) and flood insurance must be purchased as required by the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994. The builder or borrower contacts an insurance agent or broker or a Write Your Own (WYO) company.

n The insurance agent completes the necessary forms for the builder or buyer. In the case of a building constructed in an SFHA after the issuance of a Flood Insurance Rate Map (FIRM), the builder or buyer must obtain an elevation certificate completed by a licensed engineer, architect, surveyor, or appropriate community official.

n The insurance agent submits the application, necessary elevation certification, and full premium to the NFIP or to a participating WYO company.

31. How are flood insurance premiums calculated?

A number of factors are considered in determining the premium for flood insurance coverage. They include the amount of coverage purchased; location; age of the building; building occupancy; design of the building; and, for buildings in SFHAs, elevation of the building in relation to the base flood elevation. Buildings eligible for special low cost coverage at a pre-determined, reduced premium rate are single-family and 1-4 family dwellings located in zones B, C, and X. For these exceptions, certain loss limitations exist depending on the amount of insurance purchased. (See the “Flood Hazard Assessment and Mapping Requirements” section for definitions of flood zones.)

32. Is the purchase of flood insurance mandatory?

The Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 mandate the purchase of flood insurance as a condition of Federal or Federally related financial assistance for acquisition and/or construction of buildings in SFHAs of any community. The purchase of flood insurance on a voluntary basis is frequently prudent even outside of SFHAs.

The Acts prohibit Federal agency lenders, such as the Small Business Administration (SBA) and United States Department of Agricuolture’s (USDA) Rural Housing Service, and Government-Sponsored Enterprises for Housing (Freddie Mac and Fannie Mae) from making, guaranteeing, or purchasing a loan secured by improved real estate or mobile home(s) in an SFHA, unless flood insurance has been purchased, and is maintained during the term of the loan.

The Acts apply to lenders under the jurisdiction of Federal entities for lending institutions. These Federal entities include the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Comptroller of the Currency, the Office of Thrift Supervision, the National Credit Union Administration, and the Farm Credit Administration. The Act also requires Freddie Mac and Fannie Mae to implement procedures designed to ensure compliance with the mandatory purchase requirements of the Acts.

The purchase of flood insurance does not apply to conventional loans made by Federally regulated lenders when the community in which the building is located is not participating in the NFIP. Although Federal flood insurance is not available for new construction or substantially improved structures in CBRS areas, conventional loans may be made there by Federally regulated lenders. In these cases, the lending institution is required to notify the borrower that, in the event of a flood-related Presidentially declared disaster, Federal disaster assistance will not be available for the permanent repair or restoration of the building. Federally regulated or insured lending institutions are required in all cases to notify the borrower when the building being used to secure a loan is in an SFHA.

33. Why is there a requirement to purchase flood insurance in communities that have not suffered flooding in many years or ever?

A major purpose of the NFIP is to alert communities to the danger of flooding and to assist them in reducing potential property losses from flooding. Therefore, FEMA determines flood risk through the use of all available information for each community. Historical flood data are only one element used in determining flood risk. More critical determinations can 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.

34. Why is my lender requiring the purchase of flood insurance?

For virtually every mortgage transaction involving a structure in the United States, the lender reviews the current NFIP maps for the community in which the property is located to determine its relative location to the published SFHA and completes the Standard Flood Hazard Determination Form (SFHDF). If the lender determines that the structure is indeed located within the SFHA and the community is participating in the NFIP, the borrower is then notified that flood insurance will be required as a condition of receiving the loan. A similar review and notification is completed whenever a loan is sold on the secondary loan market or perhaps when the lender completes a routine review of its mortgage portfolio. This fulfills the lender's obligation under the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 that requires the purchase of flood insurance by property owners who are being assisted by Federal programs or by Federally regulated institutions in the acquisition or improvement of land, or facilities, or structures located or to be located within an SFHA.

35. Are lenders required to escrow flood insurance payments?

The statute requiring Federally regulated lenders, their servicers, and Federal Agency lenders to escrow for flood insurance became effective on October 1, 1996. If escrow for taxes, insurance, and/or other reasons is already required, escrow for flood insurance on loans secured by improved residential real estate or mobile homes is also required. Lenders who escrow will comply 100 percent with the statutory requirement by maintaining flood insurance during the term or life of the loan.

36. What if I disagree with my lender's determination that I am in the flood zone?

Property owners may not contest the requirement if the lending institution has established the requirements as a part of its own standard lending practices. However, if a lending institution is requiring the insurance to meet mandatory flood insurance purchase requirements, the property owner and lender may jointly request that FEMA review the lending institution's determination. This request must be submitted within 45 days of the date the lending institution notified the property owner that a building or manufactured home is in the SFHA and flood insurance is required. In response, FEMA will issue a Letter of Determination Review (LODR). The LODR does not result in an amendment or revision to the NFIP map. It is only a finding as to whether the building or manufactured home is in the SFHA shown on the NFIP map. The LODR remains in effect until the NFIP map panel affecting the subject building or manufactured home is revised.

37. What fees and data are required for LODRs?

A fee of $80 must be submitted with all LODR requests. The fee payment may be in the form of a check or money order, in U. S. funds, made payable to the “National Flood Insurance Program.” The fee must be accompanied by copies of the following: (1) the completed SFHDF; (2) the dated notification letter to the property owner; (3) a letter, signed by the property owner and lending institution, requesting FEMA's review; (4) an annotated copy of the effective NFIP map panel for the community showing the location of the structure or manufactured home; and (5) a copy of all material used by the lending institution or designated third party to make the determination.

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

Normally, only one building and its contents can be insured on each policy. The Dwelling Form of the Standard Flood Insurance Policy does provide coverage for up to 10 percent of policy amount for appurtenant detached garages and carports, but not for tool and storage sheds and the like. In addition, the Scheduled Building Policy is available to cover 2 to 10 buildings. The policy requires a specific amount of insurance to be designated for each building, and all buildings must have the same ownership and the same location.

39. What is the flood insurance policy term?

Flood insurance coverage is available for 1- or 3-year terms.

40. Is there a minimum premium for a flood insurance policy?

There is a minimum premium for all flood insurance policies. Because the minimum premium is subject to change, anyone interested in purchasing a flood insurance policy should contact a local property insurance agent or company who writes flood insurance coverage to obtain the current minimum premium amount.

41. Is there a waiting period for flood insurance to become effective?

There is normally a 30-day waiting period before flood insurance goes into effect. There are two exceptions:

n If the initial purchase of flood insurance is in connection with the making, increasing, extending, or renewing of a loan, there is no waiting period. The coverage becomes effective at the time of the loan, provided the application and presentment of premium are made at or prior to loan closing.

n If the initial purchase of flood insurance is made during the 13-month period following the revision or update of a Flood Insurance Rate Map for the community, there is a 1-day waiting period.

In addition to the two exceptions already mentioned, the FIA has issued a policy decision stating that: (1) the 30-day waiting period will not apply when there is an existing insurance policy and an additional amount of flood insurance is required in connection with the making, increasing, extension, or renewal of a loan, such as a second mortgage, home equity loan, or refinancing. The increased amount of flood coverage will be effective as of the time of the loan closing, provided the increased amount of coverage is applied for and the presentment of additional premium is made at or prior to the loan closing; (2) the 30-day waiting period will not apply when an additional amount of insurance is required as a result of a map revision. The increased amount of coverage will be effective at 12:01 a.m. on the first calendar day after the date the increased amount of coverage is applied for and the presentment of additional premium is made; (3) the 30-day waiting period will not apply when flood insurance is required as a result of a lender’s determining a loan that does not have flood insurance coverage should be protected by flood insurance. The coverage will be effective upon the completion of an application and the presentment of payment of premium; and, (4) the 30-day waiting period will not apply when an additional amount of insurance offered in the renewal bill is being obtained in connection with the renewal of a policy.

42. What is “presentment of payment”?

“Presentment of payment” is the receipt of premium and is considered to be the time payment is actually received by the NFIP or the WYO company. Delivery to an insurance agent or broker or mailing a premium by ordinary mail with placement of a postmark does not constitute presentment to the NFIP.

A premium mailed in a timely manner by certified mail and received by the NFIP is considered to have been delivered to and received by the NFIP as of the date of the certification at the U.S. Post Office. If time is short and coverage is needed, the certified mail transmittal of payment should be considered.

43. Is there a special rating procedure applicable to coastal high hazard areas (V zones)?

In calculating the applicable rates for buildings that were constructed or substantially improved in V zones after October 1, 1981, the actuarial formula takes into account the ability of the building to withstand the impact of wave action. The agent must follow the special instructions in the Flood Insurance Manual in preparing an application for coverage for buildings located in V zones. (See the “Flood Hazard Assessment and Mapping Requirements” section for a further explanation of V zones.)

44. What is the Coastal Barrier Resources System?

The U. S. Congress passed the Coastal Barrier Resources Act of 1982, and the Coastal Barrier Improvement Act of 1990, defining and establishing a system of protected coastal areas (including Great Lakes) known as the Coastal Barrier Resources System (CBRS), and Otherwise Protected Areas (OPAs). The Acts define areas within the CBRS as depositional geologic features consisting of unconsolidated sedimentary materials; subject to wave, tidal and wind energies; and protecting landward aquatic habitats from direct wave attack. The Acts further define coastal barriers as "all associated aquatic habitats, including the adjacent wetlands, marshes, estuaries, inlets and near shore waters, but only if such features and associated habitats contain few manmade structures and these structures and man's activities on such features, and within such habitats do not significantly impede geomorphic and ecological processes." Otherwise Protected Areas (OPAs) means an undeveloped coastal barrier within the boundaries of an area established under Federal, State, or local law, or held by a qualified organization, primarily for wildlife refuge, sanctuary, recreational, or natural resource conservation purposes. The Acts provide protection to CBRS areas by prohibiting most expenditures of Federal funds within the CBRS. These prohibitions refer to “any form of loan, grant, guarantee, insurance, payment, rebate, subsidy or any other form of direct or indirect Federal assistance,” with specific and limited exceptions.

45. Is Federal flood insurance available in CBRS?

Federal flood insurance is available in a CBRS area if the subject building was constructed (or permitted and under construction) before the CBRS area's effective date. For CBRS areas designated by the 1982 Act, the sale of Federal flood insurance is prohibited for structures built or substantially improved after October 1, 1983. For subsequent additions to the CBRS, the insurance prohibition date is shown on the Flood Insurance Rate Map (FIRM). For structures located in OPAs, insurance may be obtained if written documentation is provided certifying that the structure is used in a manner consistent with the purpose for which the area is protected. If an existing insured structure is substantially improved or damaged, any Federal flood insurance policy will not be renewed. If a Federal flood insurance policy is issued in error, it will be cancelled and the premium refunded: no claim can be paid, even if the error is not found until a claim is made.

46. Can flood insurance be cancelled at the request of the insured with a refund of premium?

Flood insurance can be cancelled, and a refund can be issued, only in certain circumstances, because the entire premium is fully earned on the first day of the policy term. Premium will be refunded on a pro-rata basis when the policyholder no longer owns or has an insurable interest in the insured property, provided no claim has been paid or is pending. There are other limited cancellation provisions for the refunding of premium. Policyholders wishing to cancel a policy should contact the insurance agent who wrote the policy to discuss cancellation criteria. Additional information about cancellations may be obtained by calling the appropriate toll-free number shown in the NFIP Address and Telephone Directory.

47. Is there a “grace period” for an insured under the NFIP policy conditions?

All policies expire at 12:01 a.m. on the last day of the effective term. (For the ease and convenience of insurance agents and brokers, lenders, and policyholders, NFIP rules allow for “renewal” of expiring policies and no new application is required.) Coverage remains in force for 30 days after the expiration of the policy, and claims for losses that occur in the period will be honored providing the full renewal premium is received by the end of the 30-day period. Coverage also remains in force for any mortgagee named in the policy for 30 days after written notice to the mortgagee of the expiration of a policy.

48. What is the requirement for purchasing flood insurance after receiving disaster assistance?

The NFIRA requires individuals in SFHAs who received disaster assistance after September 23, 1994, for flood disaster losses to real or personal property to purchase and maintain flood insurance coverage for as long as they live in the dwelling. If flood insurance is not purchased and maintained, future disaster assistance will be denied. If the structure is sold, the current owner is required to notify the buyer of the house of the need to purchase and maintain flood insurance. If the buyer is not notified, suffers uninsured flood losses, and receives Federal disaster assistance, the seller may be required to repay the Federal Government any Federal disaster assistance the buyer received.

Coverage

49. How much flood insurance coverage is available?
As of March 1, 1995, the following coverage limits are available:
Emergency Program		Regular Program
Building Coverage
Single-family dwelling*	$ 35,000	$250,000
Other residential*	$100,000	$250,000
Non-residential or	$100,000	$500,000
Small Business
Contents Coverage (per unit)
Residential	$ 10,000	$100,000
Non-residential including	$100,000	$500,000
Small Business

*Higher limits of basic coverage are available under the emergency program in Hawaii, Alaska, U.S. Virgin Islands, and Guam.

50. Are there limitations on the amount of insurance available for certain types of property?

General coverage limitations are explained in the answers to Questions 28 and 29 above. In addition, items such as paintings, etchings, pictures, tapestries, other works of art, jewelry, articles of gold, silver or platinum, and furs are limited to $250 coverage in the aggregate. This limitation does not apply to other items that are personal property or household contents usual or incidental to the occupancy of the building as a residence. For other limitations under the Standard Flood Insurance Policy, see the current policy or contact a property insurance agent or broker.

51. What flood losses are covered?

The Standard Flood Insurance Policy (SFIP) Forms contain complete definitions of the coverage’s they provide. Direct physical losses by “flood” are covered. Also covered are losses resulting from flood-related erosion caused by waves or currents of water activity exceeding anticipated cyclical levels, or caused by a severe storm, flash flood, abnormal tidal surge, or the like, which result in flooding, as defined. Damage caused by mudslides (i.e., mudflows), as specifically defined in the policy forms, is covered.

52. What coverage is available in basements and enclosed areas beneath the lowest elevated floor?

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, certain mechanical equipment necessary for the habitability of the building, such as furnaces, hot water heaters, clothes washers and dryers, food freezers, air conditioners, heat pumps, electrical junctions, and circuit breaker boxes. Finished structural elements such as paneling and linoleum, and contents items such as rugs and furniture are not covered. The SFIP has a complete list of covered elements and equipment.

53. What is 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 to be a basement if the floor is below ground level on all sides.

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

These losses are covered only if the following conditions are met: (a) There is a general and temporary condition of flooding in the area. (b) The flooding is the proximate cause of the land subsidence, sewer backup, or seepage of water.

(d) The building is insured, at the time of the loss, for at least 80 percent of its replacement cost or the maximum amount of insurance available under the NFIP.

55. Does the NFIP apply a deductible to losses?

A minimum deductible is applied separately to a building and its contents, although both may be damaged in the same flood. Higher deductibles are available, and an insurance agent can provide information on specific amounts of available deductibles. Optional higher deductibles reduce policy premiums but will have to be approved by the mortgage lender.

56. Are costs of preventive measures covered under the SFIP?

Some are. When an insured building is in imminent danger of being flooded, the reasonable expenses incurred by the insured for removal of insured contents to a safe location and return will be reimbursed up to $500, and the purchase of sandbags and sand to fill them, plastic sheeting and lumber used in connection with them, the cost of pumps, fill for temporary levees, and wood will be reimbursed up to $750. No deductible is applied to this coverage.

57. Does insurance under the NFIP provide coverage at replacement cost?

Only for single-family dwellings and residential condominium buildings, if several criteria are met. Replacement cost coverage is available for a single-family dwelling including residential condominium units that is the policyholder’s principal residence and is insured for at least 80 percent of the building’s replacement cost at the time of the loss up to the maximum amount of insurance available at the inception of the policy term. Replacement cost coverage does not apply to manufactured (i.e., mobile) homes smaller than certain dimensions specified in the policy. Losses are adjusted on a replacement cost basis for residential condominium buildings insured under the RCBAP. The principal residence and the 80 percent insurance to value requirements for single-family dwellings do not apply to the RCBAP. However, coverage amounts less than 80 percent of the building’s full replacement cost value at the time of loss will be subject to a co-insurance penalty.

Contents losses are always adjusted on an actual cash value basis. If the replacement cost conditions are not met, the building loss is also adjusted on an actual cash value basis. Actual Cash Value means the replacement cost of an insured item of property at the time of loss, less the value of physical depreciation as to the item damaged.

58. Does the flood insurance dwelling policy provide additional living expenses, if the insured dwelling is flood damaged and cannot be occupied while repairs are being made?

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

59. What is Increased Cost of Compliance coverage?

Increased Cost of Compliance (ICC) under the NFIP provides for the payment of a claim to help pay for the cost to comply with State or community floodplain management laws or ordinances from a flood event in which a 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 damaged or repetitively damaged, ICC will help pay for the cost to elevate, flood proof, demolish, or relocate the building up to a maximum benefit of $15,000. This coverage is in addition to the building coverage for the repair of actual physical damages from flood under the Standard Flood Insurance Policy (SFIP).

60. Is there a limit to the amount a policyholder can collect under ICC coverage?

Yes. The maximum amount a policyholder may collect under ICC is $15,000. This amount is in addition to the amount the policyholder will receive for physical damages by flood. The total amount the policyholder will receive for combined physical structural damage from flood and ICC is always capped by the maximum limit of coverage established by Congress. The maximum amount collectible for both ICC and physical damage from flood for a single family dwelling is $250,000.

61. Is ICC coverage included in all Standard Flood Insurance Policies?

No. Insureds under the Group Flood Insurance Policy and insureds with condominium unit owner’s coverage are ineligible for ICC coverage. Policies issued or renewed in Emergency Program communities are not eligible for ICC coverage. All other policies include the coverage.

Filing a Flood Insurance Claim

62. How does a policyholder file a claim for flood loss?

A flood insurance 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 the company’s claim procedures. The 60-day time limit for filing a proof of loss remains the same.

63. What is a “proof of loss”?

A proof of loss — the policyholder’s valuation of claimed damages — is a sworn statement made by the policyholder that substantiates the insurance claim and is required to be submitted to the NFIP or WYO company within 60 days of the loss. A printed form usually is available from the adjuster assigned to the claim.

64. What is a “loss in progress”?

A loss in progress occurs when actual flood damage to a building or its contents started before the inception of the policy.

65. Is a loss in progress covered?

The NFIP does not cover damage caused by a loss in progress under any of the flood insurance policies.

66. What is the maximum that can be collected for a loss under the NFIP policy?

An insured will never be paid more than the value of the covered loss, less deductible, up to the amounts of insurance purchased. Therefore, purchasing insurance to value is an important consideration. The amount of insurance a property owner needs should be discussed with an insurance agent or broker.

Floodplain Management Requirements

67. What is the role of the community in floodplain management?

When the community chooses to join the NFIP, it must adopt and enforce minimum floodplain management standards for participation. FEMA works closely with State and local officials to identify flood hazard areas and flood risks. The floodplain management requirements within the SFHA are designed to prevent new development from increasing the flood threat and to protect new and existing buildings from anticipated flood events.

When a community chooses to join the NFIP, it must require permits for all development in the SFHA and ensure that construction materials and methods used will minimize future flood damage. Permit files must contain documentation to substantiate how buildings were actually constructed. In return, the Federal Government makes flood insurance available for almost every building and its contents within the community. Communities must ensure that their adopted floodplain management ordinance and enforcement procedures meet program requirements. Local regulations must be updated when additional data are provided by FEMA or when Federal or State standards are revised.

68. Do State governments assist in implementing the NFIP?

At the request of the Administrator of FIA, each Governor has designated an agency of State or territorial government to coordinate that State’s or territory’s NFIP activities. These agencies often assist communities in developing and adopting necessary floodplain management measures. Some States require more stringent measures than those of the NFIP. A list of State Coordinating Agencies and their telephone numbers is provided in the final section of this booklet.

69. Do Federal requirements take precedence over State requirements?

The regulatory requirements set forth by FEMA are the minimum measures acceptable for NFIP participation. More stringent requirements adopted by the local community or State take precedence over the minimum regulatory requirements established for flood insurance availability.

70. What is meant by “floodplain management measures”?

“Floodplain management measures” refers to an overall community program of corrective and preventive measures for reducing future flood damage. These measures take a variety of forms and generally include zoning, subdivision, or building requirements, and special-purpose floodplain ordinances.

71. Do the floodplain management measures required by the NFIP affect existing buildings?

The minimum Federal requirements affect existing buildings only when an existing building is substantially damaged or improved. There may also be situations where a building has been constructed in accordance with a local floodplain management ordinance, and the owner subsequently alters it in violation of the local building code, without a permit. Such unapproved modifications to an existing building may not meet the minimum Federal requirements.

72. What constitutes “substantial improvement” or “substantial damage”?

“Substantial improvement” means any rehabilitation, addition, or other improvement of a building when the cost of the improvement equals or exceeds 50 percent of the market value of the building before start of construction of the improvement. The term includes buildings that have incurred “substantial damage.” “Substantial damage” means damage of any origin sustained by a building when the cost of restoring the building to its pre-damaged condition would equal or exceed 50 percent of the market value of the building before the damage occurred. Substantial damage is determined regardless of the actual repair work performed. Substantial improvement or damage does not, however, include any project for improvement of a building to correct existing violations of State or local health, sanitary, or safety code specifications identified by local code enforcement officials and that are the minimum necessary to assure safe living conditions. Also excluded from the substantial improvement requirement are alterations to historic buildings as defined by the NFIP.

73. Do the floodplain management requirements apply to construction taking place outside the SFHAs within the community?

The local floodplain management regulations required by the NFIP apply only in SFHAs. However, communities may regulate development in areas of moderate flood hazard.

74. Can modifications be made to the basic floodplain management requirements?

In developing their floodplain management ordinances, participating communities must meet at least the minimum regulatory standards issued by FEMA. NFIP standards and policies are reviewed periodically and revised whenever appropriate.

75. Does elevating a structure on posts or pilings remove a building from the Special Flood Hazard Area (SFHA)?

Elevating a structure on posts or pilings does not remove a building from the SFHA. If the ground around the supporting posts or pilings is within the floodplain, the building is still at risk. The structure is considered to be within the floodplain, and flood insurance will be required as a condition of receipt of Federal or Federally related financing for the structure. The reason for this, even in cases where the flood velocity is minimal, is that the hydrostatic effects of flooding can lead to the failure of the structure's posts or pilings foundation. The effects of ground saturation can lead to decreased load bearing capacity of the soil supporting the posts or pilings, which can lead to partial or full collapse of the structure. Even small areas of ponding will be subject to the hydrodynamic effects of flooding; no pond or lake is completely free of water movement or wave action. This movement of water can erode the ground around the posts or pilings and may eventually cause collapse of the structure.

Flood Hazard Assessment and Mapping Requirements

76. What is the difference between an FHBM and a FIRM?

An FHBM is based on approximate data and identifies, in general, the SFHAs within a community. It is used in the Emergency Phase of the NFIP for floodplain management and insurance purposes. A FIRM usually is issued following a flood risk assessment conducted in connection with the community's conversion to the Regular Phase of the NFIP. If a detailed assessment, termed a Flood Insurance Study, has been performed, the FIRM will show base flood elevations and insurance risk zones in addition to floodplain boundaries. The FIRM may also show a delineation of the regulatory floodway. (See Question 79 for a description of "regulatory floodway.") After the effective date of the FIRM, the community's floodplain management ordinance must be in compliance with appropriate Regular Phase requirements. Actuarial rates, based on the risk zone designations shown on the FIRM, are then applied for newly constructed, substantially improved, and substantially damaged buildings.

77. How are flood hazard areas and flood levels determined?

Flood hazard areas are determined using statistical analyses of records of riverflow, storm tides, and rainfall; information obtained through consultation with the community; floodplain topographic surveys; and hydrologic and hydraulic analyses. The FIS covers those areas subject to flooding from rivers and streams, along coastal areas and lake shores, or shallow flooding areas.

78. What is the role of the local community in its flood hazard assessment?

In conducting a FIS, FEMA considers all available information for use in the study. Public meetings are usually held with community officials and other interested parties in an effort to obtain all relevant information to help ensure accurate study results. FEMA also works closely with community officials before and during the study to describe technical and administrative procedures and to obtain community input before the FIRM and collateral FIS report are published. Before the FIS is initiated, FEMA representatives, the selected contractor, and community officials meet to discuss the areas to be studied and the level of study required. This meeting is called a “time and cost” meeting.

79. What flood hazard zones are shown on the Flood Insurance Rate Map and what do they mean?

Several areas of flood hazard are commonly identified on the FIRM. One of these areas is the SFHA, which is defined as the area that will be inundated by the flood event having a 1-percent chance of being equaled or exceeded in any given year. The 1-percent chance flood is also referred to as the 100-year or “base” flood. SFHAs are labeled as Zone A, Zone AO, Zone AH, Zones A1-30, Zone AE, Zone A99, Zone V, Zone VE, and Zones V1-30. Moderate flood hazard areas, labeled Zone B or Zone X (shaded), are also shown on the FIRM, and are the areas between the limits of the base flood and the 0.2-percent-annual-chance (or “500-year”) flood. The areas of minimal flood hazard, which are the areas outside the SFHA and above the 0.2-percent-annual-chance flood level, are labeled Zone C or Zone X (unshaded). The definitions for the various flood hazard areas are presented below.

Zone V: <