Flood insurance is a special policy backed
by the federal government, with cooperation from local communities
and private insurance companies. More than eighteen thousand
communities have agreed to stricter zoning and building measures
to control floods. Residents in these communities are entitled
to purchase flood insurance through NFIP. (Those who own
property in certain coastal barrier areas are excluded from
the federal program.)
About two hundred insurance companies, possibly
including the company that already handles your homeowner's
or auto insurance, write and service the policies for the
government, which finances the program through premiums.
The average flood policy premium is about $350 a year; some
people in low-risk zones can obtain flood insurance for as
little as $106 a year.
Even though flood insurance is relatively
inexpensive, most Americans are unprotected against flood
loss. According to the Federal Insurance Administration,
of the approximately ten million households in so-called
Special Flood Hazard Areas - the most vulnerable to flood
- no more than a quarter are covered by flood insurance.
Yet in these special hazard areas, flooding is twenty-six
times more likely to occur than a fire over the course of
a typical thirty year mortgage.
About National Flood Insurance
In 1968, Congress created the National Flood Insurance Program (NFIP) in response to the rising cost of taxpayer funded
disaster relief for flood victims and the increasing amount
of damage caused by floods. The Mitigation Division a component
of the Federal Emergency Management Agency (FEMA) manages
the NFIP, and oversees the floodplain management and mapping
components of the Program.
Nearly 20,000 communities across the United States and its
territories participate in the NFIP by adopting and enforcing
floodplain management ordinances to reduce future flood damage.
In exchange, the NFIP makes Federally backed flood insurance
available to homeowners, renters, and business owners in
these communities.
Flood damage is reduced by nearly $1 billion a year through
partnerships with communities, the insurance industry, and
the lending industry. Further, buildings constructed in compliance
with NFIP building standards suffer approximately 80 percent
less damage annually than those not built in compliance.
And, every $3 paid in flood insurance claims saves $1 in
disaster assistance payments.
The NFIP is self-supporting for the average historical loss
year, which means that operating expenses and flood insurance
claims are not paid for by the taxpayer, but through premiums
collected for flood insurance policies. The Program has borrowing
authority from the U.S. Treasury for times when losses are
heavy, however, these loans are paid back with interest.
Flood Insurance is required by law
To get secured financing to buy, build, or improve structures
in Special Flood Hazard Areas (SFHA's) you will be required
to purchase flood insurance. Lending institutions that are
federally regulated or federally insured must determine if
the structure is located in a SFHA and must provide written
notice requiring flood insurance.
Flood insurance is available to any property owner located
in a community participating in the NFIP. All areas are susceptible
to flooding, although to varying degrees, in fact, 25% of
all flood claims occur in the low-to-moderate risk areas.
Flooding can be caused by heavy rains, melting snow, by inadequate
drainage systems, failed protective devices such as levees
and dams, as well as by tropical storms and hurricanes.
There's a big difference between having to buy flood insurance
because the law says you must and choosing to buy flood coverage
because it's in your best interests to do so. We recommend
that all property owners purchase and keep flood insurance
because it is the best means of recovery from flood damaged.
Keep the peace of mind in knowing that your property will
be protected from damages from the next storm and you're
not left to cover the losses yourself? |
Mortgage Insurance Guide 
