Flood Insurance

The National Flood Insurance Program (NFIP)

The NFIP was established by Congress in 1968 in response to the escalating costs associated with repairing damage to buildings and their contents caused by flood. For many decades prior to its establishment, the national response to flood disasters was to build flood-control structures like dams, levees, and seawalls, and provide disaster relief to victims, all at the cost of tax-payer dollars. There was no incentive, however, to reduce losses or discourage development in floodplains. In fact, it actually encouraged development in flood prone areas by providing protections that often turned out to be temporary. Because of the high risk of flood and its seasonal nature, private insurance companies were not able to provide flood insurance at affordable rates and stopped offering insurance.

The intent of the NFIP is to reduce future flood damage through sound community management ordinances and provide an insurance mechanism that requires a premium be paid for protection. The Federal Emergency Management Agency (FEMA) administers the NFIP. It makes insurance policies available only to those communities that adopt floodplain management requirements and the Flood Insurance Rate Maps (FIRMs). The requirements are designed to prevent new development from increasing the flood threat and to protect new and existing buildings from anticipated flood events. The City of Flagler Beach was accepted into the NFIP on May 15, 1985.

The Community Rating System

A community in the NFIP agrees to meet the minimum requirements of the program. But if a community wants to exceed the minimum and provide a higher level of safety, it can join the Community Rating System (CRS). Flagler Beach became a member of the CRS on October 1, 1995.

The City strives to reduce future flood risk through floodplain management ordinances that require more stringent building practices; protection of wetlands that serve as natural storage areas during a flood; stormwater improvement projects; and public awareness outreach projects. FEMA rewards a CRS community for its effort through a rating system that places it into one of ten classes and reduces its flood insurance premiums by 5% each time its class rating improves. Flagler Beach achieved a Class 6 rating on May 1, 2012, which for its residents and businesses, equates to 20% discount on policies in the Special flood Hazard Area (SFHA) and a 10% discount on policies outside the SFHA. Each year, the City endeavors to improve its rating.

The Write Your Own Program (WYO)

The WYO is a cooperative effort between FEMA and the private insurance industry that allows casualty insurance companies to write and service Federal flood insurance under their own names. Begun in 1983, the participating private insurance company must be licensed and regulated by the state in which they sell flood insurance.

Be aware that in most cases, coverage from a flood insurance policy does not take effect until 30 days after purchase, so it’s important to have a policy in effect before the storm approaches. Coverage remains in force, however, for 30 days after the expiration of the policy, and claims for losses that occur during that period will be honored provided that the full renewal premium is received within 30 days of the policy expiration date.

Most homeowners’ insurance policies do not cover flood. The NFIP has two types of limited coverage: building and contents. As of June 1, 2014, a residential building (1 to 4 families) can be covered up to $250,000, and contents up to $100,000. For non-residential buildings, both the building and its contents can be covered up to $500,000 each. Lesser amounts of coverage are available, and deductibles can vary.

If a home or building is purchased through a Federally-backed mortgage, then flood insurance is mandatory for homes in the Special Flood Hazard Area (SFHA), i.e., flood zones A, AE, V and VE. But flood insurance is available to anyone, even if the structure is in a moderate to low-risk zone, like B, C, or X. In fact, according to the most recent statistics, updated in 2013, nearly 25% of NFIP claims are for policies outside the mapped high-risk areas.

Property owners should consult with their insurance agent and lender to determine the appropriate amount of insurance to purchase. Some of the factors considered in determining the premium include the amount of coverage purchased, the deductible selected, and the age of the building, building occupancy, design of the building foundation, its elevation, and the flood zone.

The chart below demonstrates just how important it is to elevate your home or business above the Base Flood Elevation (BFE) as high as is practical. It can save you a lot of money!

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