Answers to Questions About the NFIP

Flood Insurance Information for Prospective Buyers

  1. Who may purchase a flood insurance policy?
  2. How can property owners or renters find out if they are eligible to purchase flood insurance?
  3. How can a property owner determine if the property is in a Special Flood Hazard Area (SFHA)?
  4. What types of property may be insured against flood loss?
  5. What kinds of property are not insurable under the NFIP?
  6. Are there certain buildings that cannot be covered?
  7. How is flood insurance purchased?
  8. How are flood insurance premiums calculated?
  9. Is the purchase of flood insurance mandatory?
  10. Why is there a requirement to purchase flood insurance in communities that have not suffered flooding in many years or ever?
  11. Why is my lender requiring the purchase of flood insurance?
  12. Are lenders required to escrow flood insurance payments?
  13. What if I disagree with my lender's determination that I am in the flood zone?
  14. What fees and data are required for LODRs?
  15. How many buildings or locations (and their contents) may be insured on each policy?
  16. What is the flood insurance policy term?
  17. Is there a minimum premium for a flood insurance policy?
  18. Is there a waiting period for flood insurance to become effective?
  19. What is "presentment of payment"?
  20. Is there a special rating procedure applicable to coastal high hazard areas (V zones)?
  21. What is the Coastal Barrier Resources System?
  22. Is Federal flood insurance available in CBRS?
  23. Can flood insurance be cancelled at the request of the insured with a refund of premium?
  24. Is there a "grace period" for an insured under the NFIP policy conditions?
  25. What is the requirement for purchasing flood insurance after receiving disaster assistance?

 

  1. 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 Form (PDF 328KB, TXT 76KB). The unit owner may separately insure personal contents as well as obtain additional building coverage under the Dwelling Policy Form (PDF 332KB, TXT 81KB) 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.

  2. 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.shtm or contact a community official or insurance agent.

  3. 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 can be viewed and 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.

  4. 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.

  5. 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.

  6. Are there certain buildings that cannot be covered?
    Flood insurance is not available for buildings that FEMA determines have been declared by a State or local zoning authority or other appropriate 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.)

  7. 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 (PDF 446KB) and the National Flood Insurance Reform Act of 1994 (PDF 294KB). 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.

  8. 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 (BFE). Buildings eligible for special low-cost coverage at a pre-determined, reduced premium rate are single-family, one- to four-family dwellings, and non-residential buildings located in moderate-risk 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.)

  9. 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.

  10. 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.

  11. 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.

  12. 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.

  13. 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.

  14. 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.

  15. 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.

  16. What is the flood insurance policy term?
    Flood insurance coverage is available for a 1-year term.

  17. 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.

  18. 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, FEMAhas issued a policy decision specifying the following four exceptions:

      • 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.
      • 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.
      • 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.
      • 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.

  19. 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.

  20. 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.)

  21. 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.

  22. 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.

  23. 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.

  24. 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.

  25. 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.

F-084 (5/06)

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Last Modified: Monday, 17-Jul-2006 16:55:22 EDT