National Flood Insurance Program

Tabitha Jean Naylor
Flooded City Street

Congress established the National Flood Insurance Program, also known as the NFIP, in 1968. It had one primary goal: to offer affordable flood insurance coverage to homeowners. At the time, many private insurance companies didn't offer flood insurance, and those that did charged astronomical premiums since the payouts on insurance claims often exceeded any profits that could've been made. The NFIP is regulated by the Federal Emergency Management Agency (FEMA) and sells policies directly to consumers and through a network of private insurance agents across the country.

Policy Types

The NFIP offers three different types of insurance policies, all of which are based on building occupancy. For each policy type, the policy also covers the contents inside the structure.

Dwelling

This provides coverage for residential buildings that house no more than four families, including single-family homes. It also offers limited coverage for detached garages. Properties not located in special flood hazard areas that have not suffered repeated losses due to flooding may qualify for lower premiums under a dwelling policy.

General

This policy provides coverage for nonresidential buildings, as well as residential buildings that house more than four families.

Residential Condominium Building Association

This provides coverage for a residential condominium building and all units located inside the building. Owners of each individual condominium units can also purchase building and contents coverage through a dwelling policy.

Coverage

NFIP policies are broken up into the four coverage sections:

  • Coverage A - This provides coverage for the building structure itself. Limited coverage also extends to certain attached structures, and stipulations apply. For example, a garage would only be covered if it was actually functioning as a garage. A garage being used solely for storing boxes, clothes, and artwork would not be covered.
  • Coverage B - This provides coverage for your personal property. Unfortunately, items stored in a basement are not covered.
  • Coverage C - This provides coverage for costs that can help to protect the property from flood damage. These include things like sandbags, debris removal, and the transport of personal property to safety.
  • Coverage D - This covers the cost of compliance, which is capped at $30,000. This section provides for extra costs that may be incurred to comply with local regulations regarding repair or reconstruction.

Coverage for residential buildings is up to $250,000 for the structure and up to $100,000 for the contents located inside. For nonresidential properties, coverage is up to $500,000 for the building and $500,000 for its contents.

Exclusions

There are numerous exclusions to what NFIP protection will cover. You should talk with your insurance agent for exact details about how these exclusions could affect both you and your property. Examples of things not covered under an NFIP policy include:

  • Personal property outside of the building
  • Property in perilous locations affected by high tides
  • Automobiles
  • Valuables worth more than $2,500
  • Loss of business revenue
  • Loss due to earth movement as a result of flooding
  • Personal items stored in a basement

Eligibility

Flood insurance is available in about 20,000 communities nationwide. If you live in an area that's at risk of flooding, your community most likely participates in the NFIP program. You can find out for sure by contacting your insurance agent or checking the NFIP website.

If you have a mortgage on your home and live in a region designated as a special flood hazard area, flood insurance may be a mandatory requirement from your lender. One thing many people don't know is that NFIP protection is also available to renters. You do not have to be the owner of the building where you reside to qualify for flood insurance protection.

Cost

The average flood insurance policy is about $700 per year. Your premiums will be higher or lower depending on the area where you live. Full payment is required to obtain coverage, and there's a mandatory 30-day waiting period once payment has been made before the policy becomes effective.

Purchasing

The good news is that purchasing flood insurance is quick and easy. The first step is filling out the flood risk profile on the NFIP website, which is as simple as entering your address. Once you do, you'll instantly find out out if you live in a community that participates in the program. If you do, you'll also be able to obtain estimates on what your premiums would be, as well as find a local insurance agent who can help you get insured.

National Flood Insurance Program