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To protect the public, the government has
taken steps to initiate flood control measures and establish a
subsidized insurance program.
History
Under the direction of the Federal
Emergency Management Agency (FEMA), Congress established the
National Flood Insurance Program (NFIP) in 1968 by the passage of
the National Flood Insurance Act. It's purpose was to provide
property owners protection against losses from flooding. Local
communities and the federal government participate in the NFIP.
If the local community willing participates in the implementation
and enforcement of measures to reduce flood
risks in special flood hazard areas, the federal
government will make flood insurance available.
In 1981, the Federal Insurance
Administrator attempted to involve private-sector insurance companies in
the NFIP and in 1988, over 200 insurance companies had
signed arrangements with the government to sell and service flood insurance
under their own names under a "Write Your Own" (WYO)
program.
Who needs flood insurance?
A flooded home can lead to financial
ruin. Basic homeowner policies do not cover flood damage!
Flood insurance requires a special policy and it is backed by the
federal government with cooperation
from local communities and private insurance companies.
Although flood insurance is relatively inexpensive,
only about one-quarter of
the homes in flood prone areas are insured. Flooding is 26 times more likely to occur
in these ares than a fire during
the course of a typical 30-year mortgage.
More than 19,000 communities participate in
the FEMA program by adhering to stricter zoning and
building measures to control floods.
Not all properties in flood prone areas are insurable. If your home lies between the mainland and
potentially stormy ocean waters, you may not be eligible for the federally
subsidized insurance. The government limits its liability by
excluding certain areas such as the Outer Banks in North Carolina, sections of the Florida panhandle,
Delaware and South Carolina. They're
on their own, however, and prohibited from taking part in the
National Flood Insurance Program. Property owners have to buy
insurance through private programs that charge 10 times the average
premium offered by the NFIP.A FEMA study on June 27, 2000, reported
that approximately 87,000 homes or buildings have been built
on land likely to wash away during the next 60 years.
Other reasons to exclude a community
stem from the Coastal
Barrier Resources Act - an act designed to protect wildlife living
in valuable ecological areas. Development is discouraged by
the withholding of subsidized insurance.
Types of Insurable Properties
Essentially any type of walled and roofed building that is
primarily above ground and not entirely over water, may be insured
if it is located within a participating community. This includes manufactured
homes anchored to permanent foundations. It does not include travel trailers,
converted buses
or vans. Dwelling contents within insurable walled and roofed buildings
may also be insured separately.
Properties not insurable...
Who may purchase flood
insurance?
All owners, tenants, occupants, builders, condominium associations, and/or
individual owners of residential condominium units (building and contents)
located in a participating community, may purchase NFIP coverage.
Condominium associations may purchase a master policy
that covers both the common building elements and individual units owned by
members of the association. Non-residential condominium owners may
only purchase contents
coverage in their name. (The non-residential condominium
building can only be insured in the name of the association).
Note: a policy will generally not take effect until 30 days after
purchased so don't expect to run out and buy a policy before a
storm.
How do I determine my community's
eligibility to participate in flood
insurance?
Most all communities with serious flooding
potential have joined the NFIP. To find out if your community is
participating, contact a property insurance agent, broker,
or community official or simply check FEMA's
Community
Status Book.
How do I determine if my property is in a
Special Flood Hazard Area (SFHA)?
FEMA publishes flood maps that reveal hazard areas
and the degree of risk in those areas. These maps are usually
available from local Planning and Zoning at the town
hall or county building.
Is flood insurance mandatory?
The Flood Disaster Protection Act of 1973
requires the purchase of flood insurance as a condition for
receiving federal or
federally related financial assistance for acquisition and/or
construction of buildings in special flood hazard areas. Voluntary
purchase is frequently prudent even when outside of SFHAs.
The Act prohibits FHA, VA, SBA,
and other federal agencies from making or guaranteeing secured loans
when the property (building improvements) is in an SFHA
unless flood insurance has been purchased. The prohibition applies
in all communities including those not participating in the NFIP.
Flood insurance cannot be purchased for buildings in
non-participating communities.
The purchase of flood insurance does not apply for conventional
loans from federally regulated lenders when a community, in which
the building is located, is not participating in the NFIP. In these
cases, the lender is required to notify you that in the event of a flood-related Presidentially declared
disaster, Federal disaster assistance will not be available for permanent repairs or
building restoration. Federally regulated
or insured lenders are required to notify a borrower when a building being used to secure a loan is in a
SFHA.
The amount of flood insurance
coverage required by a lender cannot exceed the amount set by
Congress and should not exceed the insurable value of the building. A lending institution is not required by stature
to make a borrower purchase flood insurance for more than the
amount of the loan or for more than twice the amount of insurance
available under the Emergency Program. A lender may however, require
a borrower to purchase flood insurance
in an amount greater than required by statute and/or for buildings
outside SFHAs.
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