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National Flood Insurance Program

What is National Flood Insurance Program?

National Flood Insurance Program

National Flood Insurance Program (NFIP) offers federal flood insurance to homeowners, renters, and business owners if their community participates in the NFIP. It seeks to reduce the impact caused due to flooding through flood insurance and community floodplain regulations.

NFIP was created by U.S. Congress in 1968 and is managed by Federal Emergency Management Agency (FEMA).

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Insurance

Under NFIP, FEMA offers federally backed flood insurance in participating communities. The insurance may cover both property and the contents. FEMA does not directly sell insurance to homeowners; instead, flood insurance is provided to homeowners through flood insurance agents. Since 1978, the NFIP has paid nearly $50 billion for flood insurance claims and related costs (as of 2/17/15). The flood insurance offered by FEMA through NFIP is an important tool in managing the flood risk.

Floodplain Regulations

For a community to participate in NFIP, FEMA requires the community to adopt ordinances that meet or exceed FEMA requirements to reduce the risk of flooding. These may entail incorporating NFIP requirements into zoning codes, subdivision ordinances, building codes, or adopt special purpose floodplain management ordinances.

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How Does National Flood Insurance Program Work?

Participation in NFIP

Flood insurance can be provided by NFIP if the community participates in NFIP. FEMA defines community as "any State, or area or political subdivision thereof, or any Indian tribe or authorized tribal organization or Alaska Native village or authorized native organization, which has authority to adopt and enforce floodplain management regulations for the areas within its jurisdiction." There are two broad steps through which a community participates in the NFIP, which are listed below.

  1. Emergency Program of the NFIP:
    1. Community applies for participation in NFIP.
    2. FEMA authorizes sale of flood insurance in the community up to the Emergency Program limits. The flood insurance premium rates for pre-FIRM buildings are subsidized by the NFIP.
    3. FEMA conducts a survey and develops flood map for the community. Flood map is also known as the Flood Insurance Rate Map (FIRM). The flood maps are used by the community for regulating new construction, by the insurance agents for issuing flood issuing flood insurance, and by lenders to determine whether flood insurance is required before closing a loan.
    4. Community adopts ordinances that meet or exceed FEMA requirements to reduce the risk of flooding. These may entail incorporating NFIP requirements into zoning codes, subdivision ordinances, building codes, or adopt special purpose floodplain management ordinances.
  2. Regular Program of the NFIP:
    1. One the new community has adopted the new standards, the FEMA converts the community to the NFIP Regular Program.
    2. The amount of insurance coverage is higher under the regular program. The new construction is charged actuarial rates for flood insurance that fully reflect the building's risk of flooding.
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Insurance

Every building located in a participating community may be covered by a flood insurance policy. The insurance is sold through insurance agents. Through insurance, NFIP is mitigating the loss incurred by the homeowner. At the same time, by requiring the community to enforce standards that reduce flood loss, the NFIP is reducing the actual loss that may be incurred on the property.

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Identify if Your Community Participates in NFIP

You are eligible to purchase flood insurance as long as your community participates in the NFIP. Check the Community Status Book to see if your community is participating in NFIP.

Source :www.MortgagesAnalyzed.com

Updated: Nov 04, 2015

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National Flood Insurance Program offers flood insurance for properties located in a flood zone
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