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What to Know About the National Flood Insurance Program

November 29, 2016
Homeowners Insurance, Insurance
What to Know About the National Flood Insurance Program
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The National Flood Insurance Program was created in 1968 to help property owners and communities bounce back financially and rebuild after flooding. It’s funded by the federal government and run by the Federal Emergency Management Agency. Not all communities participate, and coverage is available only in those that do.

Communities that participate in the program agree to enforce local laws that reduce the risk of flood damage. In return, residents receive access to affordable flood insurance.

Who needs flood insurance

Whether you can — or must — buy flood insurance depends largely on how likely your area is to flood. Flood insurance is mandatory for:

  • Property owners in places designated as “special flood hazard areas” by FEMA.
  • Homeowners whose mortgage lenders require flood insurance.

The National Flood Insurance Program is a coverage option if your community participates. Annual rates for all flood insurance policies through the program averaged about $700 in 2015, according to its data. But if you live in a participating low- or moderate-risk community, you can buy it at a significantly lower, preferred policy rate.

What flood insurance covers

If you experience a flood and have insurance, you can file a claim with the insurer to pay for flood damage to:

A storm can cause all kinds of damage, but flood insurance covers only flood damage. According to the National Flood Insurance Program, that is damage caused by “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.” This includes:

  • An overflow of “inland or tidal waters,” such as a river that overflows its banks.
  • An “unusual and rapid accumulation or runoff of surface waters.”
  • A mudflow.

flood insurance Exclusions

Flood insurance doesn’t pay for damage from:

  • Rain or wind during a storm that causes flooding.
  • Hail.

The National Flood Insurance Program has very specific exclusions, so make sure you understand what a policy won’t pay for, including:

  • Land, trees and shrubs.
  • Features outside a house’s exterior walls, such as decks, patios and fences.
  • Underground structures such as wells and septic tanks.
  • Cash and paper stock certificates.
  • Temporary housing expenses if your house is uninhabitable.
  • Many items in basements. Coverage is limited to foundational elements and appliances such as the furnace and water heater; finished walls, floors and belongings in the basement aren’t covered.
  • Cars. Add comprehensive coverage to your auto policy to insure your vehicle against a flood.

How to get a National Flood Insurance Program policy

The program partners with insurers to provide coverage in participating areas. To find a local agent, visit FEMA’s flood insurance agent locator and enter your information.

After you apply and pay for your policy, there’s a 30-day waiting period before coverage starts, unless:

  • Your area was recently designated as a special hazard area.
  • The policy is started or changed in connection with your mortgage.

If your community doesn’t participate, you may be able to purchase flood insurance through a private insurer.

Lacie Glover is a staff writer at NerdWallet, a personal finance website. Email: lacie@nerdwallet.com. Twitter: @LacieWrites.