Federal Flood Insurance

The Only Flood Insurance Available

The U.S Congress established the National Flood Insurance Program (NFIP) with the passage of the National Flood Insurance Act of 1968.

The NFIP is a federal program enabling property owners in participating communities to purchase insurance as protection against flood losses in exchange for State and community floodplain management regulations that reduce future flood damages.

By the passage of this act, the government basically replaced all private flood insurance with a mandatory plan.

Why do I say this plan is mandatory? Mainly because if you try to get a mortgage, your lender will tell you if you plan to live in a flood plain. If you do, you will be required to buy this coverage to get the loan.

If you don't have a mortgage - or if you are a farmer or rancher with lots of property but few buildings, it still might be a good idea to take advantage of the program. A little water can do a lot of damage.

The National Flood Insurance Program is run by FEMA (Federal Emergency Management Agency). FEMA is the federal answer to disaster and when something big goes wrong, they’re the ones who eventually step in and try to clean up the mess, making sure that the public has food, shelter, clothing, and medical care.

As the American public learned after the disaster caused by Hurricane Katrina, FEMA was not designed to be the first responder after a disaster - your state and local governments are supposed to step in.

However, as with many things governmental, expectations now run rampant and the public now clamors for immediate aide, whether it is possible to deliver or not.

(It's gotten to the point that foreign governments and their populaces expect the same service from the US taxpayer, whether they be our friends or foes.)

In any event, the National Flood Insurance Program offers flood insurance that will help pay for loss and repair if your property becomes damaged during a flood.

According to floodsmart.gov, the official site for the National Flood Insurance Program, flood insurance usually covers:

• structural damage
• furnace, water heater and air conditioner repair or replacement
• flood debris clean up
• flooded floor surfaces such as carpeting and tile

Flood coverage can also protect your personal belongings – furniture, clothing, etc.

If you have a government insured mortgage, then flood insurance is mandatory.

Flood insurance is not free. You’ll go through a process similar to insuring your home, complete with an insurance agent.

However, since most homeowners’ insurance policies do not cover floods, federal flood insurance can offer protection above and beyond your standard homeowners insurance policy.

Although some areas are at higher risk for flooding than others, floods occur in every single state, and just one inch of floodwater can cause extensive and expensive damage to your home.

Of course if there’s a national natural disaster, there’s a good chance you’ll be eligible for federal disaster assistance, which is provided by FEMA. But that’s not necessarily free either.

According to the National Flood Insurance Program’s web site, Federal disaster assistance is usually a loan that must be paid back with interest. For a $50,000 loan at 4% interest, your monthly payment would be around $240 a month ($2,880 a year) for 30 years.

Compare that to a $100,000 flood insurance premium, which is about $500 a year ($33 a month).

So, how likely is a flood in your area? There’s a 26% chance that your home will be flooded over a thirty year period, no matter where you live. That’s a pretty high likelihood, especially considering the chance for fire damage is only 9%.

As I mentioned before, there are maps available to show whether you live in a flood plain or not. Go to FEMA's website to gain access to the maps for your area to determine if you should consider this coverage.

There is growing debate as to whether the Federal Government should replace houses destroyed by floods and hurricanes in areas that have had historically been prone to these disasters, especially along the coasts. I doubt the government will change it policies anytime in the foreseeable future and I do recommend that people in effected areas take advantage of this coverage, whether it is mandatory or not.

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