Flood Insurance: Introduction
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Frequently asked questions

Do the state insurance regulators have any jurisdiction over the NFIP in their respective states?

The NFIP established by Congress is subject to the rules and regulations of the Federal Insurance Administration. FIA has elected to have state-licensed insurance companies' agents and brokers sell flood insurance to consumers. The insurance companies' agents and brokers are held accountable by their state regulators to provide NFIP customers with the same level of standards and service that the states require of them in selling their other lines of insurance.

How does a community qualify to participate in the NFIP?
Community participation in the NFIP is voluntary. Each identified flood-prone community must assess its flood hazard and determine whether flood insurance and floodplain management would benefit the community's residents and economy. However, a community that chooses not to participate within one year after the flood hazard has been identified and a flood risk map has been provided is subject to ramifications. Because participation or non-participation can significantly affect current and future property owners in the community's floodplains and the availability of federal financial assistance in the flood-prone areas of the community, the decision should be made with a full awareness of the consequence of each action. Some states require NFIP participation as part of their state floodplain management program.

How do you know if a community participates in the NFIP?
Community Status Lists contain the following information:
  • Date of Entry into NFIP
  • Regular vs Emergency Program Designation
  • Date of Current Map
  • "NSFHA" = No Special Flood Hazard Areas

    To obtain Community Status Lists and other relevant information, try these sources:
  • http://www.fema.gov (FEMA Home Page)
  • FEMA Contact Service Center @ 800-358-9616
  • Map orders: 1-800-358-9616
  • Supply orders: 1-800-480-2520

    Is the purchase of flood insurance mandatory?
    The Flood Disaster Protection Act of 1973 mandates the purchase of flood insurance as a condition of receipt of federal or federally related financial assistance for acquisition and/or construction of buildings in Special Flood Hazard Areas (SFHAs) of any community. The purchase of flood insurance on a voluntary basis is frequently prudent even outside of SFHAs.

    The Act prohibits federal agencies such as the Federal Housing Administration, the Veterans Administration, or the Small Business Administration from making or guaranteeing a loan secured by a building in an SFHA unless flood insurance has been purchased. The prohibition applies even if the community in which the building is located is not participating in the NFIP. Flood insurance cannot be purchased for buildings in non-participating communities.

    The prohibition of the Act applies to lending institutions regulated, or whose deposits are insured by, a federal instrumentality, but does not apply for conventional loans when the community in which the building is located.

    What happens if a community does not participate in the NFIP?
    If the community's Special Flood Hazard Areas have been identified on a Flood Hazard Boundary Map (FHBM) or Flood Insurance Rate Map (FIRM) for a year and the community does not take necessary steps to participate in the NFIP, federal financial assistance (such as a Veterans Administration loan or a mortgage from a federally regulated bank) is not available.

    If a presidentially declared disaster due to flooding occurs in a non-participating community, no federal financial assistance can be provided for the permanent repair or reconstruction of insurable buildings in Special Flood Hazard Areas.

    What is the emergency program?
    The emergency program is the initial phase of a community's participation in the NFIP and is designed to provide a limited amount of insurance at federally subsidized rates prior to the effective date of the community's initial Flood Insurance Rate Map. A community participating in the emergency program is provided with a Flood Hazard Boundary Map and is required to adopt limited measures aimed at control of the future use of its floodplains.

    What is the regular program?
    The regular program is the phase of a community's participation in the NFIP when more comprehensive floodplain management requirements are imposed and higher amounts of insurance are available based on risk zones and elevations determined in the flood insurance study of the community. The Flood Insurance Rate Map is used in this phase of NFIP participation.

    What is the NFIP's "Write Your Own" (WYO) program?
    In 1981, a strong effort was begun by the Federal Insurance Administrator to re-involve private sector insurance companies in the NFIP. Representatives of major insurance companies and insurance trade associations met with FIA officials to determine the best way to achieve this re-involvement, and the company representatives outlined conditions under which the voluntary sector would become involved in the WYO program. FIA obtained the necessary clearances from other federal agencies to meet these conditions. Over the next several months, FIA, working with insurance company executives addressed and resolved the financial control issues that prevented the development of a WYO program in the past. The goals of the WYO program are:
  • Increase the NFIP policy base and the geographic distribution of policies
  • Improve service to NFIP policyholders through the infusion of insurance industry knowledge
  • Provide the insurance industry with direct operating experience with flood insurance

    In August 1983, the Administrator extended an invitation to all licensed property and casualty insurance companies to participate in the WYO program, and as of October 1986, over 200 insurance companies had signed an arrangement with FIA to sell and service flood insurance under their own names.

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    Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation. The authors, LunchTimeCE, Inc., CEfreedom, and Insurance Skills Center, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.