FLOOD INSURANCE FAQ

An Elevation Certificate is a form showing the elevation of a building’s lowest floor relative to the height water would reach in a serious (1 percent annual chance or “100-year”) flood. The certificate is used to show compliance with community floodplain management ordinances and to determine the proper flood insurance premium rate.

Your client mostly likely will need an Elevation Certificate if the building is located in a high-risk flood zone (Special Flood Hazard Area) and you are writing a new policy. In the past, only homes built after the community's initial Flood Insurance Rate Map was put in place (post-FIRM construction) required Elevation Certificates in high-risk areas. But a new law makes an Elevation Certificate necessary for many pre-FIRM buildings as well. So, first determine if the building is pre-FIRM or post-FIRM, and determine how the policyholder could be affected by the Biggert-Waters Flood Insurance Reform Act of 2012 before suggesting that your client obtain an Elevation Certificate. Keep in mind that if the lowest floor of the building is above the Base Flood Elevation, you may find that rating a pre-FIRM building using post-FIRM rates and data from an Elevation Certificate may result in a lower premium than using pre-FIRM rates.

Before instructing your client to hire a surveyor for an Elevation Certificate, check whether the community participates in the Community Rating System (CRS). Communities participating in the CRS are required to maintain a copy of Elevation Certificates for new construction or substantial improvement in high-risk flood areas made after the community joined the CRS. An additional resource for the Elevation Certificate is the building's previous owner.

Let your client know that if the property is located in a Special Flood Hazard Area (SFHA), which is shown on the FIRM as zones beginning with the letters A or V, that there is a high risk of flooding. If the property is located in Zone B, C, or X, it is considered to have a moderate-to-low risk.

If the property is located in an SFHA and has a mortgage from a federally regulated or insured lender, your client will be required to purchase flood insurance for the property. If the property is located in a moderate- to low-risk area, flood insurance is not mandatory; however, it is strongly recommended, and some lenders still might require it.

To qualify for a PRP, your client’s building must be located in zone B, C, or X on the current FIRM and must meet other prior-loss history qualifications. Your client can review the most up-to-date flood insurance premium rates.

When your community participates in the Community Rating System (CRS), you can qualify for an insurance premium discount of up to 45% if you live in a high-risk area and up to 10% in moderate-to-low risk areas. Not all policies receive discounts. Preferred Risk Policies are not eligible for discounts, nor are policies rated post-FIRM with a lowest floor elevation more than 1 foot below the Base Flood Elevation. To find out if a community participates, refer to the Community Rating System Section in the NFIP Flood Insurance Manual.

Generally, the flood insurance policy covers physical damage caused to the building and/or its contents by a flood. Below are some more detailed examples of what is and isn't covered by flood insurance. Refer clients to the Summary of Coverage (PDF 108K) Text Only Version (14K) for additional information.

• The insured building and its foundation
• Electrical and plumbing systems
• Central air conditioning equipment, furnaces, and water heaters
• Refrigerators, cooking stoves, and built-in appliances, such as dishwashers
• Permanently installed items, such as carpet on an unfinished floor, paneling, wallboard, bookcases, and cabinets
• Debris removal
• Detached garage (up to 10 percent of Building coverage)

• Personal belongings, such as clothing, furniture, and electronic equipment
• Curtains
• Portable items, such as window air conditioners and microwave ovens, etc.
• Carpets not included in Building coverage (not permanently installed)
• Clothes washers and dryers, food freezers, and the food in them

• Damage that could have been avoided including moisture, mildew, or mold resulting either from a pre-existing condition or from a lack of timely remediation
• Currency (including rare coins), precious metals, and valuable papers (including stock certificates)
• Items outside of a building, such as wells, septic systems, trees, plants, decks, patios, fences, seawalls, hot tubs, and swimming pools
• Living expenses such as temporary housing
• Financial losses caused by business interruption or loss of use of insured property

An NFIP policy is fully backed by the Federal government, which means that even if there is a catastrophic flood, the NFIP will pay flood claims.

The amount will vary according to the building type. If you are insuring a single-family home, you can purchase NFIP coverage of up to $250,000 for the building and $100,000 for contents. If the amount exceeds the NFIP limits, you can consider purchasing additional limits through an excess flood policy, sold through a private carrier and not the NFIP.

One way to reduce flood insurance premiums is to take steps to mitigate damage to the building. Some mitigation actions include removing or modifying an enclosed area below the building’s elevated floor (i.e., installing flood vents or replacing enclosure walls with lattice) and filling in a sub-grade crawlspace.

Another way is to raise the deductible. See the Rating Section, page Rate 12, of the Flood Insurance Manual for more information on deductibles. However, policyholders don’t always realize the impact that high deductibles can have on their claim. For this reason, the NFIP recommends that you advise policyholders of the impact and document their response.

Replacement Cost Value (RCV) is the amount it would cost to replace property using the same materials and construction. Actual Cash Value (ACV) is the replacement cost value at the time of the loss, less the value of its physical depreciation. Building items such as carpeting are always adjusted on an Actual Cash Value basis.

The NFIP Standard Flood Insurance Policy (SFIP) offers Replacement Cost Value for building coverage only under two forms, The Dwelling Form and the Residential Condominium Building Association Policy (RCBAP) Form. Contents coverage is always paid based on Actual Cash Value.

To be eligible for Replacement Cost Value under the Dwelling Form, certain conditions must be met. First, the building must be your primary residence, meaning you or your spouse live there at least 80 percent of the year. Second, it must be insured for at least 80 percent of its full Replacement Cost Value or the maximum amount of insurance available under the NFIP. The RCBAP Form always provides building coverage at replacement cost value; however, the form includes a coinsurance clause. This coinsurance clause requires that the building must be insured for at least 80 percent of its full replacement cost or a coinsurance penalty will be applied at the time of loss.

The NFIP also offers the General Property Form, but claims paid for both building and contents coverage are based solely on Actual Cash Value.

To file a claim, your client should call you, so you can call the insurer and file the notice of loss on behalf of the insured.

The NFIP accepts personal checks, money orders, and credit cards, including: American Express, Discover Card^®, Master Card^®, or Visa^®. Payment must be made for the full year's premium.

Unlike homeowners insurance, flood insurance does not renew automatically. Policyholders typically receive at least 1 renewal notice with payment instructions 45 to 60 days before the expiration date. You can choose to send out your own flood insurance renewal notice, use one of the direct mail templates, or make personal contact via telephone or visit to ensure your clients’ policies don’t lapse.

If the flood insurance renewal premium is to be paid out of a policyholder’s escrow account, make sure that the policy is set up to bill the first mortgage, so the renewal notice is sent to the lender.

Yes. The NFIP only charges the Federal Policy Fee to help cover administrative costs incurred to carry out the program, which is included in the total flood insurance policy premium. Your premium also includes a fee for the Reserve Fund, which is required under the Biggert-Waters Flood Inurance Reform Act of 2012.