Flood Insurance

National Flood Insurance Program Changes
A significant milestone of the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) is now upon us. Beginning today, October 1, 2013, policies newly issued, assigned or reinstated after a lapse on Pre-FIRM properties in the Special Flood Hazard Area (SFHA) are subject to full-risk rating requiring an Elevation Certificate. In addition, policies newly issued or assigned on Pre-FIRM properties using the subsidized rate on or after July 6, 2012 (the date BW 12 became law) will face full-risk rating upon renewal on or after October 1. Further, policies that were allowed to lapse after July 6, 2012 and were reinstated after October 4, 2012 will face full-risk rating upon renewal after October 1.

Existing policies (issued originally prior to July 6, 2012) on Pre-FIRM properties which are primary residences may continue to be renewed using the subsidized rate until the property is sold to a new owner or the policy lapses. It is important, therefore, that agents, companies, lenders, and the policyholders themselves maintain an awareness of the timely renewal of these existing policies to avoid a lapse which may then trigger full-risk rating and the need for an Elevation Certificate.

At this time the NFIP's grandfathering and its extension of eligibility of the Preferred Risk Policy (PRPEE) procedures will continue as usual subsequent to October 1, however, the grandfathering of subsidized rates (Pre-FIRM properties in the SFHA or ZONE D and rated without an Elevation Certificate) will not be allowed to continue upon sale of a property or the lapse and subsequent reinstatement of a subsidized policy. We expect further guidance from FEMA on the possible impact to grandfathering and PRPEE from the future implementation of section 100207 of BW 12. 

There are several resources on BW-12 for floodplain management professionals:
Flood Insurance
Flooding is one of the most common natural hazards in the United States and has caused more property damage than any other type of disaster. Buying flood insurance can provide economic protection and peace of mind. The Federal Emergency Management Agency (FEMA) wants residents and business owners to know how the National Flood Insurance Program (NFIP) works and to answer any questions they may have. Below are some common myths and misconceptions about flood insurance:
  • Myth: Only homeowners can purchase flood insurance.
  • Fact: Most homeowners, condominium unit owners, renters, and businesses in NFIP participating communities can purchase flood insurance. To find out if your community participates, go to Floodsmart.gov. The maximum coverage amounts are:
    • Homeowners and condominum unit owners: up to $250,000 in structural coverage and up to $100,000 in contents coverage
    • Renters: up to $100,000 in contents coverage
    • Businesses: up to $500,000 in commercial structural coverage and up to $500,000 in contents coverage
  • Myth: You can’t buy flood insurance if you are located in a high-flood-risk area.
  • Fact: You can buy National Flood Insurance no matter where you live, as long as your community participates in the NFIP. The NFIP was created in 1968 to make federally backed flood insurance available to property owners, renters, and businesses in eligible communities.
  • Myth: If you live in a low-flood-risk area, you don’t need flood insurance.
  • Fact: All areas are susceptible to flooding, although to varying degrees. If you live in a low-to-moderate flood risk area, it is advisable to have flood insurance. Between 20 and 25% of the NFIP’s claims come from outside high-flood-risk areas. Residential and commercial property owners located in low-to-moderate risk areas should ask their agents if they are eligible for the Preferred Risk Policy, which provides very inexpensive flood insurance protection.
  • Myth: Homeowners insurance policies cover flooding.
  • Fact: Unfortunately, many home and business owners do not find out until it is too late that their homeowners and business insurance policies do not cover flooding. The NFIP offers a separate policy that protects the single most important financial asset, which for most people is their home or business.

    Homeowners can include contents coverage in their existing NFIP policy. Residential and commercial renters can purchase flood insurance coverage for their buildings and contents/inventory and, by doing so, protect their treasured possessions or their livelihood.
  • Myth: Federal disaster assistance will pay for flood damage.
  • Fact: Before a community is eligible for disaster assistance, it must be declared a federal disaster area. Federal disaster assistance declarations are issued in less than 50% of flooding events. Furthermore, if you are uninsured and receive federal disaster assistance after a flood, you must purchase flood insurance to remain eligible for future disaster relief.
  • Myth: You can’t buy flood insurance immediately before or during a flood.
  • Fact: You can purchase National Flood Insurance at any time. There is usually a 30-day waiting period after you buy flood insurance before the policy is effective. In most cases, the policy does not cover a “loss in progress,” which is defined as a loss occurring as of midnight on the first day your policy goes into effect. Basically, if you buy flood insurance after a flood, it will not cover your past losses, only losses after the policy goes into effect.
  • Myth: The NFIP does not offer basement coverage.
  • Fact: While basement improvements such as finished walls and floors, and personal belongings in a basement are not covered by flood insurance, structural elements and essential equipment within a basement are. The following items are covered under building coverage, as long as they are connected to a power source, if required, and installed in their functioning location:
    • Sump pumps
    • Well water tanks and pumps, cisterns, and the water in them
    • Oil tanks and the oil in them, natural gas tanks and the gas in them
    • Pumps and/or tanks used in conjunction with solar energy
    • Furnaces, water heaters, air conditioners, and heat pumps
    • Electrical junction and circuit breaker boxes and required utility connections
    • Foundation elements
    • Stairways, staircases, elevators, and dumbwaiters
    • Unpainted drywall and ceilings, including fiberglass insulation
    • Cleanup
More information on flood insurance is available on the Internet at floodsmart.gov or by calling toll-free 1-800-427-2419.

Additional Information