National Flood Insurance Program
(NFIP) is a federal program
enabling property owners in participating communities to purchase flood
insurance on eligible buildings and contents, whether they are in or out of a
floodplain. This community participates in the NFIP, making federally backed
flood insurance available to its
homeowners, renters, condo owners/renters, and commercial
owners/renters. Costs vary depending on how much insurance is purchased, what it
covers and the property's flood risk.
All policy forms provide coverage for
buildings and contents. However, you might want to discuss insuring personal
property with your agent, since contents coverage is optional. Typically,
there's a 30-day waiting period from date of purchase before your policy goes
into effect. That means now is the best time to buy flood insurance.
To find out more about flood insurance and who writes flood insurance in
your area visit
Mandatory Purchase Requirement:
Pursuant to the Flood Disaster Protection Act of 1973 and the National
Flood Insurance Reform Act of 1994, the purchase of flood insurance is mandatory
for all federal or federally related financial assistance for the acquisition
and/or construction of buildings in Special Flood Hazard Areas (SFHAs). An SFHA
is defined as any A or V flood zone on a Federal Emergency Management Agency
(FEMA) Flood Insurance Rate Map (FIRM).
The mandatory purchase requirement also applies to secured loans from
such financial institutions as commercial lenders, savings and loan
associations, savings banks, and credit unions that are regulated, supervised,
or insured by federal agencies, such as the Federal Reserve, the Federal Deposit
Insurance Corporation, the Comptroller of Currency, the Farm Credit
Administration, the Office of Thrift Supervision, and the National Credit Union
Administration. It further applies to all loans purchased by Fannie Mae or
Freddie Mac in the secondary mortgage market.
Federal financial assistance programs affected by the laws include loans
and grants from agencies such as the Department of Veterans Affairs, Farmers
Home Administration, Federal Housing Administration, Small Business
Administration, and FEMA disaster assistance.
How it Works:
When making, increasing, renewing, or extending any type of federally
backed loan, lenders are required to conduct a flood zone determination using
the most current FEMA FIRM to determine if any part of the building is located
in an SFHA. If the building is in an SFHA, the federal agency or lender is
required by law to provide written notification to the borrower that flood
insurance is mandatory as a condition of the loan. Even though a portion of real
property on which a building is located may lie within an SFHA, the purchase and
notification requirements do not apply unless the building itself, or some part
of the building, is in the SFHA. However, lenders, on their own initiative, may
require the purchase of flood insurance even if a building is located outside an
SFHA. Up to 25% of all NFIP flood losses arise from outside SFHAs (B, C, and X
federal regulations, the required coverage must equal the amount of the loan
(excluding appraised value of the land) or the maximum amount of insurance
available from the NFIP, whichever is less.
How much flood insurance coverage is available?
Flood coverage limits for a standard
flood policy are: