The Fundamentals of the National Flood Insurance Program (NFIP)

1. Who can purchase a flood policy?

All owners of insurable property (building and/or contents) in a community that participates in the NFIP.

The common statement that you have to live in a flood plain in order to purchase flood insurance is not accurate.

FEMA publishes a document by state that lists the communities that do and don’t participate in the NFIP: https://www.fema.gov/national-flood-insurance-program-community-status-book

2. Definition of a flood according to the NFIP:

A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or two or more properties (at least one of which is your property) from:

Overflow of inland or tidal waters;

Unusual and rapid accumulation or runoff of surface waters from any source;

Mudflow; or

Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above.

3. One building per flood policy. (10% of the dwelling coverage can be extended to a detached garage.)

4. NFIP maximum limits: Residential - $250,000 building, $100,000 contents.  Commercial - $500,000 building, $500,000 contents

5. Coverage is for direct physical loss by or from flood: Flood insurance will not pay for some losses including but not limited to, loss of revenue/profits, loss of use, loss from interruption of business or production, or additional living expenses.

6. Private excess flood policies can be purchased when the NFIP limits are not enough.

7. Flood zones are split into two groupings: Special Flood Hazard Areas (SFHA), and Non-Special Flood Hazard Areas (Non-SFHA).

SFHA include zones where there is a 1% chance of flooding in any given year (high risk).

Non-SFHA include zones where there is a 0.2% chance of flooding in any given year. 25% - 30% of all flood losses occur in Non-SFHA zones.

8. 100 year flood term: This is a flood event that has a 1% probability of occurring in any given year. This is the same as the SFHA zone.

9. The average cost of a Non-SFHA zone residential flood policy is $500 per year.

If you have any questions regarding this information, please reach out to your trusted advisors at Hausmann-Johnson Insurance.