Flood Insurance Program — 5 Things You Ought to Know
Federal government have involved in making flood insurance coverage became available. Congress created NFIP, National Flood Insurance Program, for community to eligible for this insurance. This insurance program is administered by Federal Emergency Management Agency (FEMA)
Eligibility Criteria
In most cases government will decide that a community is flood prone, if they comply with federal flood program standards. To be eligible to get Flood Policy’s coverage, most building that is walled and have roof, and location is above ground.
Flood Insurance Program Coverage
Flood insurance program can be grouped into regular and emergency program. In regular program, it only covers basic losses and damages. In emergency programs, insured can buy separate limited flood insurance for home and building and its contents at special flood insurance rates. The emergency program takes into effect if the community applies to NFIP and gets approval from government.
Both building and contents coverage have deductibles. The standard deductible for each coverage is $1,000 under the emergency program and $500 under the regular program. The deductible applies separately to each building loss and each contents loss on a per occurrence basis. Higher deductibles are available. Flood insurance policy cover described property against all direct loss by or from flood at the described location. Indirect financial loss or loss of use is not covered.
The flood peril as defined relates only to various environmental conditions. Flood policies do not cover losses resulting from the backup of water from sewers or drains because this often results from a failure to keep drains clear or blockage by tree roots at a single location, and these are not considered to be “flood” losses. These losses might be covered by other property insurance policies.
Property Not Covered
Flood policies do not cover Accounts, bills, currency, deeds, evidences of debt, money, securities, bullion, and manuscripts Lawns, trees, shrubs, plants, growing crops, and livestock Aircraft, self-propelled vehicles, and motor vehicles Fences, retaining walls, outdoor swimming pools, bulkheads, wharves, piers, bridges, docks, and other open structures on or over water Underground structures and equipment, such as wells and septic tanks Newly constructed buildings that are in, on, or over water Structures that are primarily containers, such as gas or liquid storage tanks (does not apply to silos, grain storage buildings, or their contents).Many of these exclusions are also found on other property insurance policies.
Other Provisions in Flood Policy
Single family dwellings (other than mobile homes) are the only buildings that can be insured on a replacement cost basis under a Flood policy. Replacement cost coverage is automatically provided when the building is insured for at least 80% of its replacement value or for the maximum amount of insurance allowed by the flood program. All other losses are paid on an actual cash value basis. Debris removal expenses are covered if the amount of expenses plus the amount of the direct loss do not exceed the policy limit.
Write Your Own Program
NFIP policies can be sold by private insurance companies through the FIA’s Write Your Own program. Under this system, the FIA sets flood insurance rates, eligibility requirements, and coverage limitations. The participating insurer collects premiums and pays for losses out of these premiums. If the amount of losses exceeds the amount of premium collected, the FIA pays the difference.
Applications for the National Flood Indemnity Program must be completed in full and must be accompanied by payment in full of the gross policy premium for coverage to go into effect. Payment of partial deposit premiums is not permitted. Coverage does not take effect until after a waiting period of 30 days following the date of application, with the following exceptions: There is no waiting period when the initial purchase of food insurance is made in connection with a loan.©