After successfully completing this topic, you will be able to understand the basic provisions of the national flood insurance program.
National Flood Insurance Program (NFIP)
The National Flood Insurance Program (NFIP) is a federal program designed to insure individuals and businesses from losses caused by flooding. It encourages communities to adopt and enforce floodplain management regulations. These efforts help mitigate the effects of flooding on new and improved structures. More than 40 percent of properties insured by the program are in Florida.
The NFIP offers flood insurance to property owners if their community participates in the NFIP. Owners can purchase flood insurance only through insurance agents participating in the NFIP.
The Federal Emergency Management Agency (FEMA) identifies most flood hazard areas in the United States on Flood Insurance Rate Maps. The maps also include special flood hazard areas (SFHAs). An SFHA is a high-risk area 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.” This is also called the base flood or 100-year flood. Development within SFHAs must be restricted in a manner so as not to obstruct the natural flow of flood waters.
Premiums for flood insurance are based on the height a building sits below or above the base flood elevation based on an elevation certificate (EC). The lower the building is located, the higher the premium will be. You can get an elevation certificate by asking your local floodplain manager if your property’s elevation information is on file. If so, the community floodplain manager is authorized to complete the EC for you. If not, you may have to hire a surveyor.
FEMA maps contain two categories to identify the potential for flooding in an area: high-risk zones and low-risk zones.
Lenders require borrowers to buy flood insurance if the collateral property is in one of these zones.
• “V” zone stands for velocity zone. A V zone is most likely to flood, and the premiums are higher. These areas are on coastlines, rivers, and bays. Owners of properties built in a “V” zone must elevate the living space above the “base flood level.” The lower level may be enclosed only with breakaway materials, not permanent construction. It can’t have electrical equipment, electrical outlets, or plumbing fixtures.
• “A” zone means that there is a 1% chance the property will flood within a given year or once every 100 years.
Lenders of properties in lower risk areas may require borrowers to purchase flood insurance if the property has flooded in the past.
• “B” zone is in the 500-year floodplain, meaning the property is likely to flood once in 500 years.
• “X” zones are not likely to flood.
The Homeowner Flood Insurance Affordability Act requires gradual rate increases to properties now receiving artificially low rates. FEMA is required to increase premiums for most subsidized properties by no less than 5% annually until the premium reaches its full-risk rate.
To find out about your house or a house you are listing, go to myfloodrisk.org and enter the address of the property. The site will report on the property’s flood risk and include a map.