Flood Plain Insurance

What is the National Flood Insurance Program?

The National Flood Insurance Program was created by congress in 1968 to reduce the loss of life and property, and the rising disaster relief costs caused by flooding. The program was designed to achieve these goals by: 1) requiring that new and future substantially improved buildings be constructed to resist flood damages; 2) guiding future development away from flood hazard areas; and 3) transferring the costs of flood losses from the American taxpayers to floodplain property owners through flood insurance premiums. In recent decades, over 80 percent of disaster losses nationwide have been caused by floods.

The NFIP is a voluntary program based on a mutual agreement between the federal government and the local community. Federally-backed flood insurance coverage is available to any property owner in return for mitigation of flood risks by community regulation of floodplain development. Flood insurance, and most types of federal financial assistance, such as mortgage loans and grants, are only available in those communities that adopt and enforce a floodplain management ordinance that meets or exceeds the minimum NFIP standards. These same standards must also be adhered to by all federal agencies under a Presidential Floodplain Management Executive Order.

The NFIP's land-use regulations are intended to prevent the loss of life and property, as well as economic and social hardships, resulting from flooding. There is clear evidence that these goals have been achieved in areas where buildings and other developments are in compliance with the community's floodplain management ordinance.

Flood insurance premiums for new buildings are based on flood risk, which is determined by the elevation of the lowest floor of the structure relative to the elevation of the national base flood standard. The base flood, sometimes referred to as the "100-year" flood, has a one percent chance of occurring in any given year. FEMA has mapped over 100 million acres of flood hazard areas nationwide and has designated some six million acres of floodways along 40,000 miles of streams and rivers. Floodways are areas that must be preserved in order to allow the discharge of the base flood, and communities are required to prohibit any development within a floodway that would cause an increase in flood heights. Floodways are often the most hazardous areas within a community and generally coincide with environmentally sensitive areas.

Since 1986, and even with the flood loss claims from recent devastating hurricanes and nor'easters, the NFIP has maintained its goal of being financially self-sufficient.