| 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. The NFIP provides a listing of participating communities
in the Community Status Book. To learn if a community participates in
the NFIP, refer to this listing online at http://www.fema.gov/fema/csb.htm
or contact a community official or insurance agent.
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.
In addition, maps may be ordered online or by writing, phoning, or
faxing a request to the FEMA Map Service Center. Contact information
is listed in the "NFIP Program Information" section at the
back of this booklet. 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 that are anchored to permanent foundations and
travel trailers without wheels that are anchored to permanent foundations
and are regulated under the community's floodplain management and building
ordinances or laws. (However, this does not include 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 most 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 FIMA 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) area are not eligible
for flood insurance, but existing structures that predate 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 that a post-CBRS-designation
building is located in a CBRS area, the claim will be denied, the policy
canceled, and the premium refunded. (See the answers to 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:
- 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.
- § 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.
- 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 one-
to four-family dwellings located in Zones B, C, and X. For these exceptions,
certain loss limitations exist. (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 Agriculture'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 Acts also require 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, develop-ment
(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 location relative
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 services, 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 but not for carports, 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 only for a 1-year term.
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 agency
or company that 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:
- 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.
- 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 basic exceptions, the FIMA has issued a policy
decision specifying the following four exceptions:
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, extending, or renewing 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.
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 certification by the delivery service. (In
this context, the term "certified mail" extends not only to
the U.S. Postal Service but also to such third-party delivery services
as Federal Express [FedEx], United Parcel Service [UPS], and courier
services and the like that provide proof of mailing.) 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 NFIP 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 the 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 canceled 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 canceled, and a refund can be issued, only in
certain circumstances, because all of the 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. To discuss cancellation criteria and procedures, policyholders
should contact the insurance agent who wrote the policy or call the
NFIP toll-free at 1-800-427-4661.
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 receive 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.
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