Basics of the Federal Flood Insurance Program

With all these wild storms and so much rain this year, I thought an article of flood insurance would be appropriate...

The NFIP of National Flood Insurance Program is usually the only kind of flood insurance available to homeowners and businesses based in America.

This sort of insurance is increasingly becoming a necessity since the twentieth century saw quite a lot of serious floods in this area.

In the year 1936, the Flood Control Act was passed by Congress in order to help deal with the flooding situation. Through this law, the federal government was authorized to build structures for flood control. These included levees and dams but proved insufficient. The flooding continued to wreak havoc.

In the latter part of the 1960s, flooding costs had reached a new level. The losses of property were huge and made a large number of federal funds necessary in order to support disaster relief. It was soon apparent to Congress that a holistic program for flood prevention was in order. For this purpose, it proposed and passed the National Flood Insurance Program in the year 1968.

The FEMA or the Federal Emergency Management Agency administered the NIFP. With this program. Congress hoped to minimize losses caused by floods.

A three-way method was proposed for the management of areas vulnerable to flooding (floodplains), flood insurance, and hazard mapping for floods.

Management of Floodplains

Community involvement is a highly essential aspect of the NIFP. A huge part of this program works through voluntary participation.

Any community that contributes has to commit to initiating and carrying out a program for floodplain management in their area. They make a promise to the federal government and see it through.

Building codes, zoning, and other factors need to be enforced in order to have an effective floodplain management. Communities working with the NFIP should see about limiting any future construction in floodplains. They should also see about elevating existing structures in such areas.

When such steps are taken, the NFIP would ensure that property owners within the community are covered by flood insurance.

Mapping Of Flood Hazards

After joining FEMA, a community undergoes a study of its flood risks. This study then leads to the preparation of a FIRM or a Flood Insurance Rate Map. This map would allow one to visualize the flood risks in the community. These risks include water bodies like creeks and rivers, along with controlling factors such as dams, levees, and floodways.

In order to conduct a proper assessment of flood risks, FEMA uses a base flood or 100-year flood standard.

A base flood is one that can occur any year on a probability of 1%. A 100-year flood is one that we may expect to occur every century. If an area has a 1% chance of getting flooded every year, it’s named a special flood hazard area or SFHA.

FEMA makes use of a special coding system when drawing FIRMS and designating SFHAs. The areas that border a coastline are labeled “V”, which stands for Vulnerable. This is because these areas are highly susceptible to high waves, storms, and tsunamis.

If an area is prone to floods but not from waves, they’re labeled with “A”. These are the areas that are probably near lakes or rivers. If they are next to the cast, they’d still be somewhat safe from waves due to some reason.

Base flood elevation is another important feature of flood maps. This is the height to which water rises when a base flood occurs.

An area should be above the BFE in order to be safe during such a flood. If it’s below the level of base flood elevation, it would be at a high risk and be subject to higher premium when it comes to insurance.

Insurance For Flooding

Property owners should not underestimate the risk of a 1% flood. In such a floodplain, there is actually a huge 26% of a serious flood within 30 years. This is the average life of a mortgage.

Anyone who owns property in an SFHA should have flood insurance, especially if it’s mortgaged with a federally insured or regulated lender. Property outside of an SFHA may be insured for floods, but this decision may not be a top priority.

Property owners should purchase flood insurance from commercial insurance companies.

The reason behind it is that peril-related insurance, such as that of floods, mudflow, sewer backup, and storm surges are excluded from general insurance. this is due to the commercial property policy of water exclusion. The purchase of flood insurance is not done directly through FEMA. The process needs to be done through insurance companies that have signed a contract with the NFIP.

These companies act on the behalf of FEMA for issuing and servicing flood policies.

The transactions regarding flood insurance are conducted with the assistance of an insurance agent.

Flood insurance would have premium charges depending on certain factors. These factors include the ones below:

•   The location of the property, especially the community it belongs to

•   Whether the property is within an SFHA or not

•   The age, construction, and other features of the property

•   The elevation of the building or any other kind of property involved

The insurance company would look at each of these factors and include others according to the situation at the time. For instance, the premiums may go higher if there is a high chance of flooding in the rest of the area or even the country in general.