Many people living in common interest communities don’t consider flood insurance a priority.  Some believe their individual homeowners insurance or the insurance policy carried by the homeowners’ association will cover flood damage.  Unfortunately, these common misconceptions can leave a homeowner stranded in knee deep waters.  The following article provides answers to frequently asked questions and debunks the myths and misinterpretations that often plague the efforts of the National Flood Insurance Program (“NFIP”) to mitigate flood damage.

1.     I didn’t know flood insurance was available for homes within common interest communities.

Flood insurance is typically available to protect homes located within Colorado common interest communities.  The building and contents within the residence can be insured up to the maximum available coverage ($250,000.00 for building and $100,000 for contents as of 2006).  However, to avoid a coinsurance penalty, the property must carry at least 80% of the replacement cost.

2.     I thought my homeowners’ insurance policy covers flooding.

Homeowners’ insurance policies do not cover damage caused by flooding.  To protect against flood damage, it is necessary to purchase National Flood Insurance.

3.     I don’t know where to purchase National Flood Insurance.

Flood insurance, backed by the federal government, is available through private insurance companies.

4.     I am not sure I understand what the NFIP is and how it works.

Created in 1968, the program works to provide flood insurance to those who live in high flood risk areas, which are referred to as Special Flood Hazard Areas (“SFHAs”).  Although many people think flood insurance is not available in high-risk areas, the program was actually designed to protect people living within these areas.  If your community participates in the NFIP, flood insurance can be purchased, regardless of the particular flood risk to your property.  Additionally, under the National Flood Insurance Act, buyers of high-risk properties are required to buy flood insurance as a prerequisite to receiving a federally regulated mortgage loan.  In the year 2000, more than 4.2 million flood insurance policies were in force, representing approximately $532 billion worth of coverage.

The NFIP works to mitigate flood damage by requiring local governments that participate in the program to adhere to strict floodplain management regulations.  In this manner, the NFIP guides development away from areas with high flood risks.  Communities who choose not to participate in the program are not eligible to receive federal grants and loans, federal disaster assistance, and federal mortgages for the acquisition or construction of structures located in a floodplain.  The NFIP, with the cooperation of local governments, the insurance industry, and the lending industry, helps to reduce flood damage.

The relationship between the NFIP and the Coastal Barrier Resources Act (“CBRA”) provides one example of how the NFIP encourages home builders to choose locations wisely.  CBRA was passed to protect our country’s fragile coastal areas.  Although building along these areas is not prohibited by the NFIP, those who choose to do so may not receive any federal assistance, including federally issued flood insurance.

5.     I don’t know if my property is in a flood plain or even if my community participates in the NFIP.

To get a map of the National Flood Insurance Plan for your area, call the Federal Emergency Management Agency (“FEMA”) Map Service Center at 1-800-358-9616.  To obtain information regarding a specific piece of property, have the map and panel number available.  This specific information is not required to locate maps for counties, cities, or towns.  Nominal costs are charged for shipping and handling.

To discover if your local government has adopted the required floodplain management ordinances and is participating in the program, consult FEMA’s Community Status Book.   A list of local governments can be printed out for each state, and local governments not in the NFIP are listed at the end of each list.  An insurance agent or your building permit office will also know if your local government participates in the program.  Additionally, they will be able to tell you if you have to get permits before building in a high-risk area or before you improve or repair damage to an existing building in such location.  (The NFIP works to reduce long-term flood damage by requiring buildings that are either substantially improved or damaged to comply with NFIP standards.)

6.     My neighborhood experienced a “100-year flood” six years ago before I moved in.  We are not due for a flood for another 94 years, so I am not very concerned.

Unfortunately, the term “100-year flood” does not refer to a flood occurring only once every 100 years, but rather describes the flood elevation having a 1% chance of being flooded each year.  A 100-year flood can occur more than once in short periods of time.  The NFIP uses the 100-year flood as the standard for floodplain management and to determine the need for flood insurance.  For example, a condominium located in a high-flood-risk zone has a 26% chance of experiencing flood damage during the term of a 30-year mortgage.  In fact, a home in a mapped flood hazard area is five times more likely to be damaged by a flood than to have a major fire.

7.     Still, I am not worried.  My property sustained no damage during the 100-year flood.

The term “100-year flood” does not refer to a particcular type of flood occruing every 100 years.  It is a statement of probability describing how one flood compares to others that are likely to occur.  To determine the need for flood insurance, it is important to examine what exactly caused the flood and how high the water near your property rose.  When a storm moves across an area, rainfall amounts vary.  This explains why within a relatively small area, a “100-year flood” can occur in some places and not others.  Other factors that can exacerbate flooding are debris in waterways, small road culverts and bridges, as well as frozen or saturated ground.

8.     I am not in a high-flood-risk zone and my lender is not requiring flood insurance.  Besides, in the unlikely event of a flood, federal disaster assistance will pay for any damage.  It looks like I can save some money.

Flood insurance is a prudent investment, especially in areas that flood frequently and where major damage is likely to result.  Although you may not be in a 100-year flood plain, more severe floods can and do happen.  Floods occurring outside the high-flood-risk areas account for between 20 and 25 percent of the NFIP’s claims.  For homes located in low-to-moderate-flood risk zones, the NFIP offers a Preferred Risk Policy for a moderate cost (about $100 a year).

An flooded area will not be eligible for disaster assistance unless it is declared a federal disaster area.  When making your decision whether or not to carry flood insurance, it is important to note federal disaster assistance declarations are issued in less than 50% of flooding occurrences.  Furthermore, the premium for flood insurance averages about $350 a year and is less expensive than the interest paid on federal disaster loans.  Also, once you receive federal disaster assistance, you are required to carry flood insurance to remain eligible for future disaster relief.

9.     My building flooded a long time ago so I don’t think I am eligible for flood insurance.

If your local government is participating in the NFIP, you are eligible to purchase flood insurance. Additionally, flood insurance can be purchased at any time, even right before or during a flooding situation. However, after applying and paying the premium, there is a 30-day waiting period before the policy becomes effective.  In most cases the insurance agent who writes your policy can provide you with the exact date your policy becomes effective. There is no waiting period when flood insurance is required by a lender. If the premium is presented at the completion of a loan application, coverage will begin immediately.

Additionally, in recent years the NFIP has become concerned about a portion of insured properties subject to repeat flood damage.  Most of these buildings are older structures built prior to a community becoming aware of its flood hazards.  In response, FEMA has developed a Repetitive Loss Program (“RLP”), identifying properties that have endured multiple losses and targeting them for special mitigation actions to reduce the risk of future flood damage.

10.     Flood insurance won’t cover damage done to my basement.

This statement is a misconception.  A basement is defined by the NFIP as any area of a building with a floor below ground level on all sides, including a sunken room or any portion of a sunken room.  Although basement improvements and personal belongings kept in the basement are not covered, structural elements, essential equipment, and other basic items found in a basement are covered by flood insurance.  Although many of these items are covered under building coverage, some of them are also covered by contents coverage.  Owners are encouraged to purchase both types of insurance for the broadest range of coverage.  If connected to a power source and installed in their functioning location, the following items are covered under building coverage:

  • sump pumps
  • well water tanks and pumps, cisterns and the water in them
  • oil tanks and the oil in them, natural gas tanks and the gas in them
  • pumps and/or tanks used in conjunction with solar energy
  • furnaces, hot water heaters, air conditioners, and heat pumps
  • electrical junction and circuit breaker boxes and required utility connections
  • foundation elements
  • stairways, staircases, elevators and dumbwaiters
  • unpainted drywalls and sheetrock walls and ceilings, including fiberglass insulation
  • cleanup

The following items are covered under contents coverage:

  • clothes washers
  • clothes dryers
  • food freezers and the food in them

11.     I am mostly concerned with mudslides, which are not covered by flood insurance.

The NFIP defines a flood as a general and temporary condition of partial or complete inundation of normally dry land.  Mudslides and mudflows, which are proximately caused by flooding, are compared to a river of flowing mud on the surfaces of normally dry land areas.  Therefore, the damage caused by mudslide is covered by flood insurance.  Other natural disasters that fall under the NFIP’s definition of a “flood” are the overflow of inland or tidal waters, the unusual and rapid accumulation or runoff of surface waters from any source, and the collapse or subsidence of land along a body of water caused by erosion by waves or currents or water above the cyclical levels.

To fall under the requirement of a general and temporary condition, the flood must affect either two or more adjacent properties or two or more acres of land, as well as having a distinct beginning point and ending point.  Additionally, the flood waters can only be surface water covering land that is normally dry.  For example, rain entering through wind-damaged windo, doors, holes in a roof, or wall, fall under the category of windstorm damage.  Fortunately, most homeowners policies provide coverage for wind and hail damage.

For more information about flood insurance, contact your insurance company or
call the FNIP at 1-888-Flood29, TDD # 1-800-427-5593.