10 Crucial Facts About the National Flood Insurance Program
March 20, 2023
Author: Deena Gallo

Are you worried about the possibility of floods damaging your property? Are you unsure if you need to purchase a separate flood insurance policy to protect yourself?The National Flood Insurance Program (NFIP) is a government-sponsored program that provides insurance coverage for homeowners, renters, and business owners in the United States who are at risk of flooding. The program was created in 1968 to help individuals and businesses recover financially from flood disasters, and it is administered by the Federal Emergency Management Agency (FEMA). 

Here are some important things to keep in mind when considering NFIP coverage:

You can buy flood insurance no matter what your flood risk is.

The NFIP is a federally funded program that enables individuals to purchase flood insurance regardless of their flood risk. This means that if you live in a high-risk flood zone or a low-risk flood zone, you are still eligible to purchase flood insurance through the NFIP. The program was established to ensure that individuals living in flood-prone areas have access to affordable flood insurance to protect their homes and property in the event of a flood. It is important to note that the cost of flood insurance through the NFIP will vary depending on the level of risk associated with your location, but the program provides an important resource for all individuals to mitigate the financial risks associated with flooding.

Flood damage is not covered by homeowner's or renter's insurance policies.

Flood damage is not typically covered by standard homeowners or renters insurance policies. It is important to note that even if you live in an area that is at high risk for flooding, you will likely need to purchase a separate flood insurance policy to protect your property. This is because most standard insurance policies do not include coverage for damage caused by floods, which can lead to significant financial losses for homeowners or renters. Therefore, it is crucial to carefully review your insurance policy and consider purchasing additional coverage if you live in an area prone to flooding. By taking these precautions, you can ensure that you are adequately protected and minimize the financial impact of flood damage on your property.

Everyone lives in a flood zone.

NFIP coverage is not just limited to high-risk flood zones, but it is available in almost every area in the United States. Everyone lives in a flood zone, regardless of where they live. While some areas may be more susceptible to flooding than others, the reality is that floods can happen anywhere and at any time. Floods can be caused by a variety of factors, such as heavy rainfall, snowmelt, storm surge, or even human-made events like dam failures or water main breaks. The effects of flooding can be devastating, causing extensive property damage, loss of life, and disruption to communities. Therefore, it is crucial for everyone to understand the risks associated with flooding and take appropriate measures to prepare and protect themselves, their homes, and their businesses. This can include purchasing flood insurance, creating an emergency plan, and staying informed about local weather and flood warnings. By taking these steps, individuals can help to mitigate the potential impacts of flooding and ensure the safety and well-being of themselves and their loved ones.

It has a waiting period.

The NFIP requires a 30-day waiting period before a new flood insurance policy becomes effective. This waiting period is intended to encourage property owners to purchase flood insurance before a flood event occurs, as opposed to waiting until after a flood has already occurred. The waiting period applies to both new policies and policy renewals, and it begins on the date of purchase or renewal. There are a few exceptions to the waiting period, including when flood insurance is required as a condition of a federally backed mortgage loan, or if a policy is purchased in connection with a property's initial purchase. However, it's important to note that these exceptions are subject to certain limitations and restrictions. It's recommended that property owners purchase flood insurance well in advance of any potential flooding event to ensure they have adequate coverage in place.

It has coverage limits.

The NFIP provides coverage for both buildings and personal property, but the coverage limits are subject to certain restrictions. For residential buildings, the maximum coverage limit is $250,000 for the structure and $100,000 for personal property. Non-residential buildings, such as commercial properties, have a maximum coverage limit of $500,000 for the structure and $500,000 for personal property. These limits are designed to provide a basic level of coverage for property owners, but may not be sufficient to cover the full cost of repairs or replacement in the event of a catastrophic flood. Additionally, some types of property, such as basements, are subject to specific limitations and exclusions under the NFIP. It's important for property owners to carefully review their policy and understand the limitations and exclusions that may apply to their specific situation. For those who require higher coverage limits, it may be possible to purchase additional coverage through a private insurer or through the NFIP's Excess Flood Insurance program.

It has deductibles.

The standard deductible is a fixed dollar amount that is chosen by the policyholder at the time of purchase. The amount of the deductible can vary depending on the policyholder's location, risk level, and other factors, but generally ranges from $1,000 to $10,000. While a higher deductible can lower the cost of premiums, it also means that the policyholder will be responsible for a larger out-of-pocket expense in the event of a flood. It's important for policyholders to carefully consider their deductible options and choose a deductible that they can afford to pay in the event of a flood.

It doesn't cover everything.

There are some important limitations to what the NFIP covers. For example, the NFIP does not cover damage caused by sewer backups or groundwater seepage, nor does it cover losses resulting from mold or mildew. Additionally, the NFIP also does not cover loss of use, meaning that it will not provide funds to cover temporary living expenses if a home or business is uninhabitable due to flood damage. Finally, the NFIP does not cover damage to vehicles or personal property, which would require separate insurance coverage. It's important for property owners to be aware of these limitations and to consider additional insurance options if they want more comprehensive coverage.

Contents coverage is separate, so renter's can insure their belongings, too.

Renters who are concerned about protecting their personal belongings from flood damage can obtain contents coverage for flood insurance through a separate policy. The NFIP offers renters the ability to purchase contents-only flood insurance, which covers personal belongings such as clothing, electronics, furniture, and other items that may be damaged or destroyed by flood waters. To obtain contents-only flood insurance, renters can contact an insurance agent who is authorized to sell NFIP policies. It's important for renters to note that the maximum coverage amount for contents-only policies is $100,000, which may not be enough to cover the full value of their belongings.

Federal disaster assistance is NOT the answer.

Federal disaster assistance is not the answer when there is a flood because it is not reliable, and it may not provide sufficient support for those who have suffered significant losses. After a major flood event, the federal government may declare a disaster and offer assistance to affected individuals and communities. However, this assistance is typically limited in scope and may take a long time to arrive. Moreover, the assistance provided by the government is often in the form of low-interest loans, which can add to the financial burden of those who are already struggling to recover from flood damage.

You should consider additional policies.

 In certain cases, an NFIP policy may not provide sufficient coverage for your specific needs. Consider purchasing additional policies to ensure you have comprehensive protection.

The NFIP is an important resource for homeowners and businesses in areas prone to flooding, providing essential protection against the financial devastation that can result from flood damage. However, there are other private insurance options that may offer more comprehensive coverage and better meet the needs of individual property owners. Private insurance policies may have higher coverage limits, shorter waiting periods, and more flexible terms than those offered by the NFIP. As such, it is important for property owners to carefully consider their options when it comes to flood insurance and to choose the policy that best suits their needs. By obtaining the right insurance coverage and taking proactive measures to reduce their risk of flooding, property owners can protect their investments and avoid the financial losses that can result from flood damage.