National Flood Insurance
Residents in flood-prone areas can purchase national flood insurance to protect their homes and businesses against water damage caused by a natural disaster. Heavy rain, melting snow, broken levees or dams and hurricanes can create storm surges or swelling rivers and creeks that can quickly devastate home and business owners. Any region carries a risk of flooding, but some are more prone than others. Most homeowners' policies do not include protection against water damage, leaving individuals and families to handle the clean-up and costly repairs of floors, walls, carpets, furnaces and irreplaceable personal belongings. Decades ago, companies wouldn't even provide any coverage for such disasters, considering the risk and payout too great. But in recent years, the federal government has adopted a national flood insurance plan to insure that communities in high-risk areas have the opportunity to purchase a secure policy.
In 1968, Congress passed legislation to launch the National Flood Insurance Program (NFIP) to provide an alternative to disaster relief assistance to individuals and businesses owning or renting property in flood-prone regions and reduce the increasing cost of repairing damage to buildings and personal property. Under the guidance of the Federal Emergency Management Agency (FEMA), the Mitigation Directorate and the Federal Insurance Administration manage over 20,000 communities who have joined the plan and agreed to adopt floodplain management ordinances to reduce future damage. In exchange, the program offers federally-backed policies to people owning or renting property for personal or business use in the community. Policies can be written by any licensed agent. Floodplain ordinances have reduced disaster relief costs by nearly $1 billion annually. Plus, buildings constructed under the NFIP building code suffer much less damage than those that do not. "Therefore whosoever heareth these sayings of mine, and doeth them, I will liken him unto a wise man, which built his house upon a rock: And the rain descended, and the floods came, and the winds blew, and beat upon that house; and it fell not: for it was founded upon a rock." (Matthew 7:24-25)
Community involvement in the National Flood Insurance Program is voluntary, usually initiated through interest or with a notification from FEMA. The federal agency provides a flood hazard boundary map, showing areas prone to flooding and asking the community to implement management regulations to control use of these floodplains. After the application process has been completed, FEMA assesses the risk of flooding and where development is possible. When the sale of national flood insurance is authorized, communities receive an insurance rate map and are given six months to adopt the regulation into its local zoning and building code ordinances. As communities pass stricter legislation, FEMA transfers them from the emergency phase of the program to a regular program. Less than 10 percent of communities in the NFIP remain in the initial emergency phase.
Since its inception, the federal government has continued to improve the program. The Flood Disaster Protection Act of 1973 made the purchase of flood insurance mandatory for properties located in special hazard areas and required banks, savings & loan associates and other similar agents to offer policies to residents at risk. In 1994, Congress passed the National Flood Insurance Reform Act requiring the board of the NFIP and other federal banking regulatory agencies to submit regular reports for four years to determine methods of compliance, regions examined, areas not compliant, actions that were taken to correct misinformation, and recommendations for future action. Congress continued to extend FEMA's authority to issue policies through 2002 and 2003, but problems were still found in the program, especially following the destruction caused by Hurricanes Katrina, Rita and Wilma. These storms caused an estimated $24 billion - more than the total claims paid in the entire history of the NFIP. Opponents of the program have argued that the National Flood Insurance Program has cost taxpayers billions of dollars and have permitted development in floodplain areas, creating risks that otherwise would not have existed. The program is still under review. Legislation passed in 2004 and again in 2006 have modernized the plan. The NFIP Participation Evaluation Act of 2007 launched initiatives to increase the accessibility of coverage to low-income property owners in high-risk areas.
Arguments aside, the National Flood Insurance Program has made much progress in educating the public in management and prevention. By providing flood insurance rate maps, individuals and business owners can determine first-hand whether property is located in a high-risk special hazard area or a low-to-moderate risk area. These maps are usually accessible at a community's planning and zoning department. The NFIP has also taken the initiative to correct erroneous maps previously used by mortgage companies to require purchase of policies and increase premiums unnecessarily. With a better and more accurate understanding of their risk, individuals have the freedom to determine how much coverage they want to purchase instead of relying on information from their mortgage companies, saving thousands of dollars on average. Individuals purchasing property in a hazard area, according to their mortgage company, can request a risk analysis from FEMA to determine accurate risk. If erroneous information is discovered, policyholders are entitled to a refund of the current year's premium as long as they have not filed a claim.
No one is fully ready for a disaster when one comes, but it is wise to takes precautions and prepare as much as possible for when the unthinkable does happen. Flood insurance is just one of many areas in which home and business owners can prepare for disaster. National and local programs have come a long way since the 1960s and will continue to develop in the next several years. Consumers should be aware and take flood risk into consideration when purchasing property. By weighing the level of risk, people can then pursue the level of precaution needed and affordable that is comfortable and within their personal budgets.
In 1968, Congress passed legislation to launch the National Flood Insurance Program (NFIP) to provide an alternative to disaster relief assistance to individuals and businesses owning or renting property in flood-prone regions and reduce the increasing cost of repairing damage to buildings and personal property. Under the guidance of the Federal Emergency Management Agency (FEMA), the Mitigation Directorate and the Federal Insurance Administration manage over 20,000 communities who have joined the plan and agreed to adopt floodplain management ordinances to reduce future damage. In exchange, the program offers federally-backed policies to people owning or renting property for personal or business use in the community. Policies can be written by any licensed agent. Floodplain ordinances have reduced disaster relief costs by nearly $1 billion annually. Plus, buildings constructed under the NFIP building code suffer much less damage than those that do not. "Therefore whosoever heareth these sayings of mine, and doeth them, I will liken him unto a wise man, which built his house upon a rock: And the rain descended, and the floods came, and the winds blew, and beat upon that house; and it fell not: for it was founded upon a rock." (Matthew 7:24-25)
Community involvement in the National Flood Insurance Program is voluntary, usually initiated through interest or with a notification from FEMA. The federal agency provides a flood hazard boundary map, showing areas prone to flooding and asking the community to implement management regulations to control use of these floodplains. After the application process has been completed, FEMA assesses the risk of flooding and where development is possible. When the sale of national flood insurance is authorized, communities receive an insurance rate map and are given six months to adopt the regulation into its local zoning and building code ordinances. As communities pass stricter legislation, FEMA transfers them from the emergency phase of the program to a regular program. Less than 10 percent of communities in the NFIP remain in the initial emergency phase.
Since its inception, the federal government has continued to improve the program. The Flood Disaster Protection Act of 1973 made the purchase of flood insurance mandatory for properties located in special hazard areas and required banks, savings & loan associates and other similar agents to offer policies to residents at risk. In 1994, Congress passed the National Flood Insurance Reform Act requiring the board of the NFIP and other federal banking regulatory agencies to submit regular reports for four years to determine methods of compliance, regions examined, areas not compliant, actions that were taken to correct misinformation, and recommendations for future action. Congress continued to extend FEMA's authority to issue policies through 2002 and 2003, but problems were still found in the program, especially following the destruction caused by Hurricanes Katrina, Rita and Wilma. These storms caused an estimated $24 billion - more than the total claims paid in the entire history of the NFIP. Opponents of the program have argued that the National Flood Insurance Program has cost taxpayers billions of dollars and have permitted development in floodplain areas, creating risks that otherwise would not have existed. The program is still under review. Legislation passed in 2004 and again in 2006 have modernized the plan. The NFIP Participation Evaluation Act of 2007 launched initiatives to increase the accessibility of coverage to low-income property owners in high-risk areas.
Arguments aside, the National Flood Insurance Program has made much progress in educating the public in management and prevention. By providing flood insurance rate maps, individuals and business owners can determine first-hand whether property is located in a high-risk special hazard area or a low-to-moderate risk area. These maps are usually accessible at a community's planning and zoning department. The NFIP has also taken the initiative to correct erroneous maps previously used by mortgage companies to require purchase of policies and increase premiums unnecessarily. With a better and more accurate understanding of their risk, individuals have the freedom to determine how much coverage they want to purchase instead of relying on information from their mortgage companies, saving thousands of dollars on average. Individuals purchasing property in a hazard area, according to their mortgage company, can request a risk analysis from FEMA to determine accurate risk. If erroneous information is discovered, policyholders are entitled to a refund of the current year's premium as long as they have not filed a claim.
No one is fully ready for a disaster when one comes, but it is wise to takes precautions and prepare as much as possible for when the unthinkable does happen. Flood insurance is just one of many areas in which home and business owners can prepare for disaster. National and local programs have come a long way since the 1960s and will continue to develop in the next several years. Consumers should be aware and take flood risk into consideration when purchasing property. By weighing the level of risk, people can then pursue the level of precaution needed and affordable that is comfortable and within their personal budgets.
National Flood Insurance
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