The coverage found in a Flood Insurance policy is straightforward and simple. The prices are also easy to understand and are the same from company to company. But when you start talking about flood zones, who is required to buy it and by whom… confusion sets in. The following is very good information about Flood Insurance, written by Fidelity National Flood Insurance, and re-printed with permission.
Background – NFIP
The National Flood Insurance Program was created as part of the Federal Emergency Management Agency back in 1973 to provide flood insurance to property owners who had risk from flooding to buildings and contents nationwide. See About the NFIP on www.Floodsmart.gov.
- Private insurance companies declined to cover flood risk because too many buildings could be damaged during the same event, this occurred too frequently and premiums would be high for those properties at greatest risk. But property owners continued to need coverage.
- To assign premiums related to the risk of flooding, Federal flood hazard maps were developed to pinpoint flood risk for each property for communities throughout the US who chose to join the flood program. Each property was determined to be either high risk (A or V zones) or low to moderate risk (B, C, or X zones). The flood hazard zone and details of the building construction were developed into a premium rating structure that has been modified over the years but is in use today. All building types, ownership types and risk zones would be covered.
Why is flood insurance “required” by my mortgage company?
Generally, flood maps should be reviewed every 5 years to account for flood events and new technology and modified, if deemed necessary. Mapping technology has been improved recently so considering these two facts many flood maps are being revised and accepted by the local municipalities as a condition of their participation in the NFIP so their communities can purchase flood insurance. See When Insurance is Required on www.Floodsmart.gov.
If my location is protected by a levee why do I still need to purchase flood insurance?
Levees are built to protect against average flood levels but flood events can and do exceed those levels. In fact, weather patterns, land development and other factors are changing the flood patterns. Also, levees built many years ago may not have been maintained properly and may be suffering from defects. The levees are being inspected and if they do not meet the specifications to handle today’s floods either because they were built lower or they no longer are deemed sufficient then property owners need to understand their risk and be prepared by purchasing flood insurance to cover that risk. See NFIP and Levees Frequently Asked Questions at www.Floodsmart.gov.