FAQ

The NFIP is a Federal program created by Congress to mitigate future flood losses nationwide through sound, community-enforced building and zoning ordinances and to provide access to affordable, federally backed flood insurance protection for property owners. The NFIP is designed to provide an insurance alternative to disaster assistance to meet the escalating costs of repairing damage to buildings and their contents caused by floods.

Participation in the NFIP is based on an agreement between local communities and the Federal Government that states that if a community will adopt and enforce a floodplain management ordinance to reduce future flood risks to new construction in Special Flood Hazard Areas (SFHAs), the Federal Government will make flood insurance available within the community as a financial protection against flood losses.

In support of the NFIP, FEMA identifies flood hazard areas throughout the United States and its territories. Most areas of flood hazard are commonly identified on Flood Insurance Rate Maps (FIRMs). Areas not yet identified by a FIRM may be mapped on Flood Hazard Boundary Maps (FHBMs). Several areas of flood hazards are identified on these maps. One of these areas is the
Special Flood Hazard Area (SFHA).

The SFHA is a high-risk area defined as any land that would be inundated by a flood having a 1-percent chance of occurring in a given year (also referred to as the base flood). The high-risk-area standard constitutes a reasonable compromise between the need for building restrictions to minimize potential loss of life and property and the economic benefits to be derived from floodplain development. Development may take place within an SFHA, provided that development complies with local floodplain management ordinances, which must meet the minimum Federal requirements. Flood insurance is required for insurable structures within high-risk areas to protect Federal financial investments and assistance used for acquisition and/or construction purposes within communities participating in the NFIP.

A Flood Insurance Rate Map (FIRM) is an official map of a community on which FEMA has delineated both the special hazard areas and the risk premium zones applicable to the community.

Flood is defined in the Standard Flood Insurance Policy (SFIP), in part, as:

A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from overflow of inland or tidal waters, from unusual and rapid accumulation or runoff of surface waters from any source, or from mudflow.

For a complete definition, call us at 973.627.5500.

As established by the U.S. Congress, the sale of flood insurance under the NFIP is subject to FEMA rules and regulations. FEMA has elected to have state-licensed insurance companies’ agents and brokers sell flood insurance to consumers. State regulators hold the insurance companies’ agents and brokers accountable for providing NFIP customers with the same standards and level of service that the states require of them in selling their other lines of insurance.

Individuals can phone the general NFIP information number at 1-800-427-4661 to find out if their community participates in the CRS and to learn about the amount of the premium discount.

The decision to join the CRS is a voluntary action of a community’s elected officials. As with many community actions, citizens can contact their local elected officials and encourage the community to consider learning more about joining the CRS. Additional technical assistance resources are available through 1-800-427-4661, which can provide further assistance about joining the CRS. The CRS website (http://www.fema.gov/business/nfip/crs.shtm) also provides additional contact information for technical assistance with applying for the CRS.

NFIP coverage is available to all owners of eligible property (a building and/or its contents) located in a community participating in the NFIP. Owners and renters may insure their property against flood loss. Owners of buildings in the course of construction, condominium associations, and owners of residential condominium units in participating communities all may purchase flood insurance.

Condominium associations may purchase insurance coverage on a residential building, including all units, and its commonly owned contents under the Residential Condominium Building Association Policy (RCBAP). The unit owner may separately insure personal contents as well as obtain additional building coverage under the Dwelling Form as long as the unit owner’s share of the RCBAP and his/her added coverage do not exceed the statutory limits for a single-family dwelling. The owner of any condominium unit in a non-residential condominium building may purchase only contents coverage for that unit.

NFIP coverage is available only in participating communities. Almost all of the nation’s communities with serious flooding potential have joined the NFIP. The NFIP provides a list of participating communities in the Community Status Book. To learn if your community participates in the NFIP, refer to this list online at www.fema.gov/national-flood-insurance-program/national-flood-insurance-program-community-status-book or contact your community official or us at 973.627.5500.

FEMA provides mapped communities with a single paper map of their community. The maps are generally kept in community planning or building permit departments where they should be available for review. In addition, digital flood maps can be viewed on FEMA’s Map Information eXchange (FMIX) website at http://msc.fema.gov. Property owners can also contact us at 973.627.5500.

Insurance may be written on any building eligible for coverage with two or more outside rigid walls and a fully secured roof that is affixed to a permanent site. Buildings must resist flotation, collapse, and lateral movement. The structure must be located in a community that participates in the NFIP.

• Manufactured (i.e., mobile, travel trailers without wheels) homes that are affixed and anchored to a permanent foundation are eligible for coverage.
• Contents coverage for personal belongings located within an eligible building can also be purchased.

Buildings entirely over water or principally below ground, gas and liquid storage tanks, animals, birds, fish, aircraft, wharves, piers, bulkheads, growing crops, shrubbery, land, livestock, roads, machinery or equipment in the open, and most motor vehicles are not insurable through the NFIP.

After a community joins the NFIP, a policy may be purchased from any licensed property insurance agent or broker who is in good standing in the state in which the agent is licensed. The agent will complete the flood insurance application, obtain the proper supporting documentation required, and determine the rates for establishing the flood insurance premium.

The steps to purchase flood insurance are as follows:

• Identify the flood zone in which the structure is located.
• Complete the flood insurance application.
• If required, obtain supporting documentation (i.e., elevation certificate, photos, zone determination).
• Submit the completed application, supporting documentation, and full premium to the insurer.

For a quote or more information, contact us at 973.627.5500.

A number of factors are considered in determining the premium for flood insurance coverage. They include the amount of coverage purchased; the deductible amount selected; the flood zone; location; age of the building; building occupancy; and design of the building (foundation type). For buildings in SFHAs built after the community entered the flood program (Post-FIRM), the elevation of the building in relation to the Base Flood Elevation (BFE) is also a factor in determining the premium.

The Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 mandate that federally regulated, supervised, or insured financial institutions and Federal Agency lenders require flood insurance for buildings located in a participating NFIP community and in an SFHA. Some financial institutions may require flood insurance for properties outside the SFHA as part of their own risk management process.

A major purpose of the NFIP is to alert communities to the danger of flooding and to assist them in reducing potential property losses from flooding. Historical flood data are only one element used in determining a community’s flood risk. More critical determinations can be made by evaluating the community’s rainfall and river-flow data, topography, wind velocity, tidal surge, flood-control measures, development (existing and planned), community maps, and other data. Over time, additional development or changes in these factors can alter the flood risk, and flood maps may be revised.

Lenders are mandated under the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 to require the purchase of flood insurance by property owners who acquire loans from federally regulated, supervised, or insured financial institutions for the acquisition or improvement of land, facilities, or structures located within or to be located within an SFHA. The lender reviews the current NFIP maps for the community in which the property is located to determine its location relative to the published SFHA and completes the Standard Flood Hazard Determination Form (SFHDF). If the lender determines that the structure is indeed located within the SFHA and the community is participating in the NFIP, the borrower is then notified that flood insurance will be required as a condition of receiving the loan. A similar review and notification are completed whenever a loan is sold on the secondary loan market or perhaps when the lender completes a routine review of its mortgage portfolio.

Yes. If a lender, its servicer, or a Federal Agency lender requires the escrow of taxes, insurance premiums, fees, or any other charges for a loan secured by improved residential real estate or mobile homes, it shall also require the escrow of all premiums and fees for any flood insurance. This requirement applies to loans made, increased, extended, or renewed on or after October 1, 1996.

Requiring lenders to escrow for flood insurance premiums improves compliance with flood insurance requirements by ensuring that homeowners located in Special Flood Hazard Areas obtain and maintain flood insurance for the life of the loan.

If a lending institution is requiring the insurance to meet mandatory flood insurance purchase requirements, the property owners may not contest the requirement if the lending institution has established the requirements as a part of its own standard lending practices. However, if a lending institution is requiring the insurance to meet mandatory flood insurance purchase requirements, the property owner and lender may jointly request that FEMA review the lending
institution’s determination. This request must be submitted within 45 days of the date the lending institution notified the property owner that a building or manufactured home is in the SFHA and flood insurance is required. In response, FEMA will issue a Letter of Determination Review (LODR). The LODR process should be used as a last resort. Before the LODR process is engaged, the property owners should contact their lender and provide them with additional documentation to support their position.

Some lenders reserve the right in their loan documents to require the purchase of flood insurance regardless of the flood zone. Property owners may not contest the requirement to purchase flood insurance if the lending institution has established the requirement as a part of its own standard lending practice.

The LODR does not result in an amendment or revision to the NFIP map. It only upholds or overturns the lender’s determination. The LODR remains in effect until the NFIP map panel affecting the subject building or manufactured home is revised. The LODR process does not consider the elevation of the structure above the flood level. It considers only the location of the structure relative to the SFHA shown on the effective FIRM. FEMA confirms the location of the structure on the FIRM by examining the data source used by the lender to make the determination.

A fee must be submitted with all LODR requests. The fee payment may be in the form of a check or money order, in U.S. dollars, made payable to the “National Flood Insurance Program.”

Only one building and its contents can be insured on a policy. However, the Dwelling Form of the Standard Flood Insurance Policy (SFIP) does provide coverage for up to 10 percent of the policy amount for appurtenant detached garages.

Flood insurance coverage is available for a 1-year term.

No, there is no minimum coverage requirement if coverage is being purchased voluntarily.

However, if coverage is being purchased as the result of a lender requirement (mandatory purchase requirement), the amount of flood insurance required must be at least equal to the lesser of (1) the outstanding principal balance of the loan, (2) the maximum amount available under the NFIP, or (3) the total insurable value of the property.

Some lenders reserve the right in their loan documents to require the purchase of flood insurance above the amount required by law. If so, they may require the amount of coverage to be as high as the building’s replacement cost value. Property owners should consult with their insurance agent and lender to determine the appropriate amount of insurance to purchase. To contact us, please call 973.627.5500. This does not apply to the Group Flood Insurance Policy (GFIP).

Yes. To recognize policyholders who have built in compliance with the FIRM and/ or remained loyal customers of the NFIP by maintaining continuous coverage, FEMA has “grandfather rules.” These rules allow such policyholders to benefit in the rating for that building. For such buildings, the insured would have the option of using the current rating criteria for that building or having the premium rate determined by using the BFE and/or flood zone on a previous FIRM that was in effect when the building was originally constructed (for those built in compliance) or when coverage was first obtained (for those with continuous coverage). This leads to cost savings to insureds when the new map resulting from a map revision would result in a higher premium rate.

Yes. There is a 30-day waiting period before flood coverage goes into effect. The effective date of a new policy will be:

• 12:01 a.m., local time, on the 30th calendar day after the application date and the presentment of premium.

However, there are exceptions in which the 30-day waiting period does not apply:

• In connection with making, increasing, extending, or renewing a loan, whether conventional or otherwise, flood insurance that is initially purchased in connection with the making, increasing, extending, or renewal of a loan shall be effective at the time of loan closing, provided that the policy is applied for and the presentment of premium is made at the time of or prior to the loan closing.
• In connection with lender requirement, the 30-day waiting period does not apply when flood insurance is required as a result of a lender determining that a loan on a building in an SFHA that does not have flood insurance coverage should be protected by flood insurance. The coverage is effective upon the completion of an application and the presentment of payment of premium.
• When the initial purchase of flood insurance is in connection with the revision or updating of a Flood Hazard Boundary Map (FHBM) or Flood Insurance Rate Map (FIRM): During the 13-month period beginning on the effective date of the map revision, the effective date of a new policy shall be 12:01 a.m., local time, following the day after the application date and the presentment of premium. This rule applies only where the FHBM or FIRM is revised to show the building to be in an SFHA when it had not been in an SFHA.

Presentment of premium is defined as:

• The date of the check or credit card payment by the applicant or the applicant’s representative if the premium payment is not part of a loan closing.
• The date of the closing, if the premium payment is part of a loan closing.

For a loan closing, premium payment from the escrow account (lender’s check), title company, or settlement attorney is considered made at closing, regardless of when the check is received by the writing company.

Yes, in some cases. For example, if the policyholder sold the property and no longer has an insurable interest in it, the policy can be canceled with a pro-rated return.

However, due to the seasonal nature of flooding, and to protect the lender’s interest, there are limited valid cancellations reasons. The valid cancellation reasons and the proper procedures and documentation required to cancel a policy are outlined in the NFIP Flood Insurance Manual.

To request a cancellation, the policyholder should contact the insurance agent servicing the policy. To contact us, call 973.627.5500.

All policies expire at 12:01 a.m. on the last day of the policy term.

However, coverage remains in force for 30 days after the expiration of the policy, and claims for losses that occur during the period will be honored provided that the full renewal premium is received within 30 days of the policy expiration date.

Coverage also remains in force for the benefit of any mortgagee, but only for 30 days after the mortgagee is notified of the cancellation or expiration.

The following coverage limits are available under the Dwelling Form and the General Property Form of the Standard Flood Insurance Policy (SFIP). Coverage limits under the Residential Condominium Building Association Policy (RCBAP) are listed in the NFIP Flood Insurance Manual.

* Under the Emergency Program, higher limits of building coverage are available in Alaska, Hawaii, the U.S. Virgin Islands, and Guam.

Direct physical losses “by flood,” losses resulting from flood-related erosion caused by waves or currents of water activity exceeding anticipated cyclical levels, or caused by a severe storm, flash flood, abnormal tidal surge, which result in flooding, as defined in the SFIP. Damage caused by mudflows, as specifically defined in the policy forms, is covered.

A minimum deductible is applied separately to a building and its contents, although both may be damaged in the same flood. Optional deductibles are available, and an insurance agent can provide information on specific amounts of available deductibles. Optional high deductibles reduce policy premiums but will have to be approved by the mortgage lender.

When a building is under construction, alteration, or repair and does not have at least two rigid exterior walls and a fully secured roof at the time of the loss, the deductible amount will be two times the deductible that would otherwise apply to a completed building. The deductible does not apply to:

• Loss avoidance measures;
• Condominium loss assessments; or
• Increased cost of compliance.

Some are. When an insured building is in imminent danger of being flooded, the reasonable expenses incurred by the insured for the removal of insured property to a safe location and return will be reimbursed up to $1,000, and the purchase of sandbags and sand to fill them, plastic sheeting and lumber used in connection with them, pumps, fill for temporary levees, and wood will be reimbursed up to $1,000. No deductible is applied to this coverage.

Note: The coverage for Sandbags, Supplies, and Labor applies only if damage to insured property by or from flood is imminent, and the threat of flood damage is apparent enough to lead a person of common prudence to anticipate flood damage.

One of the following must also occur:
(a) A general and temporary condition of flooding in the area near the described location must occur, even if the flood does not reach the insured building; or
(b) A legally authorized official must issue an evacuation order or other civil order for the community in which the insured building is located calling for measures to preserve life and property from the peril of flood. This coverage does not increase the Coverage A or Coverage B limit of liability.

For additional information, refer to any of the SFIP forms, Section III. Property Covered, Part C. Coverage C – Other Coverages: 2. a. and b.

Replacement cost coverage is available for a single-family dwelling, insured under the Dwelling Form that is the policyholder’s principal residence and is insured for at least 80 percent of the building’s total insurable value at the time of the loss, or the maximum amount of insurance available under the Program. Replacement cost coverage does not apply to manufactured (i.e., mobile) homes smaller than certain dimensions specified in the policy.

Losses are adjusted on a replacement cost basis for residential condominium buildings insured under the Residential Condominium Building Association Policy (RCBAP). However, coverage amounts less than 80 percent of the building’s full replacement cost value (RCV) at the time of loss will be subject to a coinsurance penalty.

Building losses under the General Property Form are always adjusted on an actual cash value basis.

Contents losses are always adjusted on an actual cash value basis. Actual cash value means the replacement cost of an insured item of property at the time of loss, less the value of physical depreciation of the item damaged.

No. The policy covers only direct physical flood damage to the dwelling and does not provide for additional living expenses.

Increased Cost of Compliance (ICC) coverage under the SFIP provides for the payment of a claim to help pay for the cost to comply with state or community floodplain management laws or ordinances from a flood event in which a building has been declared substantially damaged or repetitively damaged. When an insured building is damaged by a flood and the state or community declares the building to be substantially damaged or repetitively damaged, ICC coverage will help pay for the cost to elevate, floodproof, demolish, or relocate the building up to a maximum benefit of $30,000. This coverage is in addition to the building coverage for the repair of actual physical damages from flood under the SFIP.

Yes. The maximum amount a policyholder may collect under ICC is $30,000. This amount is in addition to the amount the policyholder receives for physical damages by flood. The total amount the policyholder receives for combined physical structural damage from flood and ICC is always capped by the maximum limit of coverage established by Congress. The maximum amount collectible for both ICC and physical damage from flood for a single-family dwelling is $250,000.

Yes—however, not all buildings are eligible for ICC coverage. To be eligible for ICC coverage, a building must be declared substantially damaged, and there must be mitigation activities to reduce the building’s exposure to future flood damage. Refer to Section D of the policy form for more information regarding ICC coverage.

A flood insurance policyholder should immediately report any flood loss to the insurance company or agent who wrote the policy. If your policy is with our office, you can contact us at 973.627.5500 to file a claim. A claims adjuster will be assigned the loss, and the policyholder must file a “proof of loss” within 60 days of the date of loss. The 60-day time limit for filling a proof of loss remains the same.

A proof of loss—the policyholder’s valuation of claimed damages—is a sworn statement made by the policyholder that substantiates the insurance claim and is required to be submitted to the NFIP or company within 60 days of the loss. A printed form usually is available from the adjuster assigned to the claim.

Note: Some companies and agents may require the proof of loss to be affirmed by a public notary.

A loss in progress occurs when actual flood damage to a building or its contents started before the inception of the policy, or when coverage is added at the insured’s request when a flood is imminent.

The NFIP does not cover damage caused by a loss in progress under any of the flood insurance policies.

An insured will never be paid more than the value of the covered loss, less deductible, up to the amounts of insurance purchased. Therefore, purchasing insurance to value is an important consideration. The amount of insurance a property owner needs should be discussed with an insurance agent or broker.

For more information, contact us at 973.627.5500.

Elevating a structure on posts or pilings does not remove a building from the SFHA. If the ground around the supporting posts or pilings is within the floodplain, the building is still at risk. Ground saturation can lead to decreased load-bearing capacity of the soil supporting the posts or pilings, which can lead to partial or full collapse of the structure. Flood insurance will be required as a condition of receipt of Federal or federally regulated financing for the structure. FEMA recommends securely elevating structures above the SFHA to reduce the risk to life and property, and has established a rating structure that could result in significant savings in premium costs for those who elevate.

Elevating a structure on posts or pilings does not remove a building from the SFHA. If the ground around the supporting posts or pilings is within the floodplain, the building is still at risk. Ground saturation can lead to decreased load-bearing capacity of the soil supporting the posts or pilings, which can lead to partial or full collapse of the structure. Flood insurance will be required as a condition of receipt of Federal or federally regulated financing for the structure.
FEMA recommends securely elevating structures above the SFHA to reduce the risk to life and property, and has established a rating structure that could result in significant savings in premium costs for those who elevate.

Flood hazard areas are determined using statistical analyses of records of riverflow, storm tides, erosion, wave heights, and rainfall; information obtained through consultation with the community; floodplain topographic surveys; and coastal, hydrologic, and hydraulic analyses. The FIS covers those areas subject to flooding from rivers and streams, along coastal areas and lakeshores, and/or shallow flooding areas.

A Flood Hazard Boundary Map (FHBM) is based on approximate data and identifies the SFHAs within a community. It is used in the NFIP’s Emergency Program for floodplain management and insurance purposes. A FIRM or Digital Flood Insurance Rate Map (DFIRM) is normally issued following a flood risk assessment conducted in connection with a community’s conversion to the NFIP’s Regular Program. If a detailed assessment, termed a Flood Insurance Study (FIS), has been performed, the FIRM will show Base Flood Elevations (BFEs) and insurance risk zones in addition to floodplain boundaries. The FIRM may also show a delineation of the regulatory floodway. After the effective date of the FIRM, the community’s floodplain management ordinance must be in compliance with appropriate Regular Program requirements. Actuarial rates, based on the risk zone designations shown on the FIRM, are then applied for newly constructed, substantially improved, and substantially damaged buildings.