America has experienced another tragedy that’s affected the entire nation. This disaster was a reminder of the devastating effects of Mother Nature’s movement of water.
The U.S. Congress established the National Flood Insurance Program (NFIP) with the passage of the National Flood Insurance Act of 1968. The NFIP is a federal program enabling property owners in participating communities to purchase insurance as a protection against flood losses in exchange for state and community floodplain management regulations that reduce future flood damages. Participation in the NFIP is based on an agreement between communities and the federal government. If a community adopts and enforces a floodplain management ordinance to reduce future flood risk to new construction in floodplains, the government will make flood insurance available within the community as a financial protection against flood losses. This insurance is designed to provide an insurance alternative to disaster assistance to reduce the escalating costs of repairing damage to buildings and their contents caused by floods.
Flood insurance provides the mechanism by which floodplain occupants are compensated for flood damages. Flood insurance also provides a way for some of the financial burden of flood losses to be removed from taxpayers, such as for federal disaster assistance and casualty loss deductions under federal income taxes.
The number of policies in force in the United States has increased from about 95,000 before the Flood Disaster Protection Act of 1973, to 2.2 million in 1989, to more than 4.3 million currently. Any property owner of insurable property may purchase flood insurance coverage, provided that the community in which the property is located is participating in the NFIP.
FEMA works closely with the insurance industry to facilitate the sale and servicing of flood insurance policies. Flood insurance under the NFIP is sold to owners of property located in NFIP communities through two mechanisms: through state-licensed property and casualty insurance agents and brokers who deal directly with FEMA and through private insurance companies with a program created in 1983 known as “Write Your Own” (WYO).
The Standard Flood Insurance Policy (SFIP) specifies the terms and conditions of the agreement of insurance between FEMA or a WYO company as the “Insurer” and the “Insureds.” Insureds in NFIP communities include owners, renters, builders of buildings that are in the course of construction, condominium associations, and owners of residential condominium units.
The SFIP is issued on one of three available policy forms, depending on the occupancy of the building, to provide coverage for the peril of flood.
• The Dwelling Form is used to insure one to four family buildings and individual residential condominium units.
• The General Property Form covers residential buildings of more than four families as well as non-residential risks.
• The Residential Condominium Building Association Policy (RCBAP) Form insures associations under the condominium form of ownership.
Above are some direct cuts from the FEMA information to give you some basic information about the National Flood Insurance Program. Contact your insurance professional for more information. IBI