Most homeowner insurance policies do not cover property losses resulting from flooding. However, flood insurance is available for most enclosed buildings and can cover the structure and/or contents. This includes homes, condominiums, mobile homes, commercial structures, agricultural structures and the contents of rental units. Flood insurance can protect citizens in the event a federal disaster has not been declared (which is required for most federal disaster assistance to be offered). Flood insurance coverage from the NFIP is an asset to homeowners and business owners as it reimburses property owners for financial losses incurred from a flood event.
Flood insurance coverage through the NFIP does have limits. Single-family homes, or 2-4 family residential structures are limited to $250,000 in damages. Other residential buildings and non-residential buildings are capped at $500,000. For contents-only policies, residences are limited to $100,000 in damages, while the contents of commercial and other structures are capped at $500,000.
Mandatory Purchase Requirement
The Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 made the purchase of flood insurance mandatory for federally backed mortgages on buildings located in a Special Flood Hazard Area (SFHA). A SFHA is any flood zone starting with the letter “A” or “V”. The requirement applies to secured mortgage loans from financial institutions, all mortgage loans purchased by Fannie Mae or Freddie Mac, and all forms of federally related financial assistance.
Lenders are required to complete the Standard Flood Hazard Determination Form whenever they create, increase, extend or renew a mortgage, home equity, home improvement, commercial or farm credit loan. If an insurable structure is located in a SFHA, the agency or lender is compelled by law to require the recipient to purchase a flood insurance policy for the structure. If the recipient declines to purchase the mandatory flood insurance coverage, the agency or lender can purchase the flood insurance coverage and charge the recipient for it. This latter action is called “force placed insurance”.
There is a 30-day waiting period between purchase of a policy and when coverage commences. The waiting period is instituted to avert purchasing insurance when a major storm such as hurricane or tropical storm is forecast (only to cancel the policy when the threat passes). The following exceptions apply:
- When the purchase of insurance is conducted in connection with making, increasing, extending or renewing a loan.
- When the purchase of insurance occurs during the one-year period following issuance of a revised flood map for a community.
Please see the National Flood Insurance Program website at www.floodsmart.gov or call the NFIP toll-free at (888) 379-9531, for information on policy rates and coverage. Contacting a local insurance agent or lender for details is also suggested. Be aware that for existing loans there is typically a 30-day waiting period before coverage is officially initiated.
To lower the cost of National Flood Insurance Program policies, unincorporated Nassau County also participates in the Community Rating System. With points earned in this program, owners of property located in flood zones A, AE, and VE within unincorporated Nassau County qualify for a 10% discount on flood insurance policy premiums. The value of these discounts total $368K annually.