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Regular insurance policies do not cover damage due to floods, because floods are a
known hazard. If your house is located in a regulated floodplain (Special Flood Hazard Area),
and is financed through a lending institution that is federally regulated or federally insured,
then you must purchase flood insurance. Insurance may be purchased through your personal
insurance agent or company. You can protect your home up to $250,000 for the structure and
$100,000 for its contents. There is a 30-day waiting period before coverage
goes into effect. Do not wait until the next flood to purchase your insurance.
If you do not live in a regulated floodplain, you still qualify for a Preferred Risk Policy,
which is a special flood insurance coverage. This type of policy allows you to obtain coverage
up to $250,000 for the structure and $60,000 for the contents at significantly reduced rates.
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.
For more information visit the Federal Emergency Management Agency's NFIP website: NFIP Information
National Flood Insurance Program (NFIP)
This community participates in the National Flood Insurance Program (NFIP).
The NFIP makes federally backed flood insurance available for all buildings, whether
they are in a floodplain or not. Flood insurance covers direct losses caused by surface
flooding, including a river flowing over its banks, a lake or ocean storm, and local drainage problems.
The NFIP insures buildings, including mobile homes, with two types of coverage: structural and
contents. Structural coverage is for the walls, floors, insulation, furnace, and other items
permanently attached to the structure. Contents coverage may be purchased separately provided the
contents are in an insurable building.
Mandatory Purchase Requirement
The mandatory purchase requirement applies to all forms of federal or federally related assistance
for buildings located in a Special Flood Hazard Area (SFHA). This requirement affects all loans and
grants for the purchase, construction, repair, or improvement of any publicly or privately owned buildings
in the SFHA, including machinery, equipment, fixtures and furnishings contained in such buildings.
Financial assistance programs affected include loans and grants from agencies such as the Department of
Veterans Affairs, Farmers Home Administration, Federal Housing Administration, Small Business Administration
and Federal Emergency Management Agency. The requirement also applies to secured mortgage loans from financial
institutions such as commercial lenders, savings and loan associations, savings banks, and credit unions that
are regulated, supervised or insured by Federal agencies such as the Federal Deposit Insurance Corporation
and the Office of Thrift Supervision. It also applies to all mortgage loans purchased by Fannie Mae or Freddie
Mac in the secondary mortgage market.
How it Works
Before a person can receive a loan or other financial assistance from one of the affected agencies or lenders,
there must be a check to see if the building is in a Special Flood Hazard Area (SFHA). The SFHA is the base
(100 year) floodplain mapped on a Flood Insurance Rate Map (FIRM). It is shown as one or more zones that begin
with the letter "A" or "V".
Copies of the FIRM are available for review in most local government building or planning departments. Many
lenders and insurance agents also have copies. It is the agency's or the lender's responsibility to check the
FIRM to determine if the building is in a SFHA, although many communities provide assistance.
If the building is in a SFHA, the agency or lender is required by law to require the recipient to purchase
a flood insurance policy on the building. The requirement is for structural coverage equal to the amount of
the loan (or the financial assistance) or the maximum amount available, whichever is less. The maximum amount
available for a single family house is $250,000.
The mandatory purchase requirement does not affect loans or financial assistance for items that are not
covered by a flood insurance policy, such as vehicles, business expenses, landscaping and vacant lots. It
does not affect loans for buildings that are not in the SFHA, even though a portion of the lot may be floodprone.
While not mandated by law, a lender may require a flood insurance policy as a condition of a loan for a property
in any zone on a Flood Insurance Rate Map.
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