Flood Insurance
The National Flood Insurance Program (NFIP) is a federally subsidized
program authorized by Congress in 1968 to protect property owners
who, up to that time, were unable to secure flood insurance through
the private insurance industry. The program is administered by the
Department of Homeland Security’s Federal Emergency Management
Agency (FEMA).
Flood coverage is available in communities that have qualified
for participation in the NFIP by agreeing to adopt and enforce flood
plain management ordinances designed to reduce future flood losses.
Nearly 20,000 communities participate in the program nationally.
In Ohio, 721 (655 municipalities, 86 counties) participate in the
NFIP. There are 64 communities in Ohio (62 municipalities and unincorporated
areas in two counties, Highland and Hardin) with flood hazard areas
not participating.
NFIP statistics for Ohio and US
NFIP had over 4.4 million policyholders in the US, totaling nearly
$673.2 billion in coverage at year-end 2003. Ohio had 34,738 policies
in force as of year-end 2003 for nearly $3.6 billion of coverage.
FEMA estimates that there are about 280,000 structures located in
Ohio’s mapped flood plain areas, with a value of $11 billion.
About 10% of the structures in Ohio’s floodplains are protected
by flood insurance. FEMA estimates that about 30% of flood plain
structures nationally carry flood insurance.
The US average flood insurance policy purchased in 2003 was for
$151,355 of coverage, with an average premium of $416. In October
2002 the average US premium was $391 premium for $141,374 of coverage.
Ohio’s loss picture from 1978–2003 shows a total of
15,071 losses with payments of nearly $109.5 million. The average
cost of a flood insurance policy in Ohio at year-end 2003 was $536.
The average coverage per policy was $103,334. Policies in force
by Ohio community and county as of year-end 2003 are available
online at www.fema.gov/nfip/10110309.shtm#oht.
Ohio loss information by community through 2003 is available online
at www.fema.gov/nfip/10400312.shtm#39.
2002–2003 policies in force by state can be found below.
Policy availability
After a community qualifies for the NFIP, a flood insurance policy
may be purchased from licensed P/C insurance agents, brokers or
company representatives. 93 insurance companies participate in the
NFIP’s Write Your Own (WYO) program. Through this program,
insurance companies have arrangements to sell and service flood
insurance policies (including settling claims) under their own names
while the federal government underwrites the coverage. In May 2003,
95% of all NFIP policies were written through WYO companies. 86%
of Ohio’s flood 2003 policies were written by WYO carriers.
Coverages available
NFIP coverage is available to all owners and occupants of insurable
property (building and/or contents) in a participating NFIP community.
Flood insurance is available to:
- Homeowners for protection of their structure and contents,
and renters for protection of contents
- Builders in the course of construction, condominium associations
and condominium owners
- Condominium associations that can purchase a master policy to
cover both the common areas and their members’ individually
owned units
- Residential condominium unit owners may purchase building and
contents flood insurance to supplement the association’s
policy
- Owners of nonresidential condominium units may purchase contents
coverage
Residential property can be insured up to $250,000; furnishings
and contents coverage can be purchased up to $100,000. Commercial
property can be insured up to $500,000 on the building and $500,000
on contents. All policies carry a deductible, usually $500 or $1,000,
with the deductible applying separately to structure and contents.
There is a 30-day waiting period before new or modified flood insurance
policies go into effect. Exceptions include loan-related mandates,
flood plain map-related revisions and certain renewal increases.
Lenders are required to notify borrowers or lessees when a property
is located in a special flood hazard area that makes flood insurance
mandatory.
2004 flood policy changes
The Preferred Risk Policy (PRP) was introduced in 1989 for low
to moderate risk residences. A major overhaul to this policy went
into effect for all new or renewed PRPs on May 1, 2004.
PRP insurance policy changes include:
- Extended coverage: Coverage will apply not only to 1–4
family residences, but also to other residential property such
as tourist and rooming houses, and non-residential occupancies.
- Coverage limits raised: 1–4 family residential limits
will increase from $250,000/$60,000 (current limits of building/contents)
to $250,000/$100,000 (new), with a premium increase of $1.00.
- New offer of non-residential buildings/contents coverage: Maximum
coverage will be $500,000/$500,000.
- Extended coverage for renters: Contents-only coverage will
extended to owners and tenants of all eligible occupancies, except
when contents are located entirely in a basement.
PRP eligibility is based on the property’s cumulative history
of flood loss. Guidelines have been established for a property to
meet in order to be eligible for this type of flood policy.
Flood insurance policy forms are available on the Web at www.fema.gov/nfip/sfip.shtm.
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Since January 1964 Ohio’s federally declared
disasters have cost more than $242 million, excluding insurance.
(Ohio EMA) |
Facts about cost and coverage
According to the NFIP, the number of flood insurance policies in
force in the US and its territories increased by 61% between 1993–2002,
from about 2.8 million to about 4.5 million. The number of flood
insurance policies purchased by Ohioans increased nearly 46% between
1994–2003.
NFIP estimates that 90% of all natural disasters involve flooding
and between 25–30% of flood insurance claims are for damage
in low risk areas due to the increased severity of storms.
Homeowners/renters
insurance policies do not typically cover losses
due to flooding. Flooded vehicles, however, are covered under
the comprehensive portion of an auto insurance policy. Property
does
not have to be located in a flood plain to qualify for coverage.
As long as the property is located within an approved NFIP
community,
it is eligible for flood insurance.
The cost of a flood policy depends mainly on location. About one
in four policies written are for properties not located in a flood
plain. 1–4 unit residential buildings not located in “special
flood hazard areas” by the NFIP are likely candidates for
a preferred risk policy (PRP). These policies cost between 233–263
a year for $100,000 in structural coverage and $40,000 for contents.
(Note: See above for outline changes
in the PRP effective May 1, 2004.)
Flood insurance protects against damages caused only by surface
flooding and has limited coverage in basements. It does not generally
cover basement sewer backup or sump pump failure; however, there
are certain loss conditions where such coverage may apply. Coverage
for sewer backup is available as an endorsement to most homeowners
policies.
Finished portions of a basement (walls, floors, ceilings and contents)
are not covered under flood insurance. Other exclusions typically
include gas and liquid storage tanks, walks and driveways, motor
vehicles, landscaping, crops and livestock.
Unimproved structural parts such as the foundation, walls, stairways
and utility connections are covered by flood insurance. Other items
usually covered include sump pumps, water tanks, furnaces, water
heaters, heat pumps, washers and dryers, food freezers, air conditioners
and clean-up, as part of the structural coverage.
Types of floods and flood stages in Ohio
Three types of flooding occur in Ohio: general river floods, urban
and small stream, and flash floods. General river flooding occurs
after heavy rainfalls. Since it occurs slowly, residents usually
have advance warning in order to prepare for evacuation if necessary.
Urban and small stream flooding occurs when heavy rain falls in
shorter periods of time. Storm sewers and small streams cannot handle
the runoff, which results in flooded underpasses and basements,
and backed-up sewers.
Flash flooding is always life-threatening because it occurs very
quickly. 2–4 inches of rain in a couple of hours can trigger
a flash flood.
2003 Ohio flood events
Floods and flash floods are two leading weather-related killers
in the US. In Ohio there have been 35 flood-related deaths in the
last 10 years.
Many of the recent federally declared disasters in Ohio are flood
related. It’s estimated that about 90% of all federally
declared disasters include flooding. See the chart
below for
recent Ohio federally
declared disasters.
During the summer of 2003 severe thunderstorms and strong winds
caused six flood-related deaths in Ohio.
Over the 4th of July weekend in 2003 severe storms and strong winds
across most of the state caused substantial flooding in northwest
and west-central parts of Ohio. 6–12 inches of rain fell over
five days in these parts of the state. A federal disaster was declared
for Mercer, Van Wert, Auglaize, Shelby, Logan and Darke counties.
In late July heavy rains, strong winds and a tornado struck northeastern
Ohio. Three drowning deaths were blamed on the storms and damage
to more than 300 homes in Summit County caused them to be declared
destroyed or uninhabitable.
NFIP Reauthorization Bill
The National Flood Insurance Program Reauthorization Act of 2004
is aimed at extending the flood insurance program through 2008.
The bill targets repetitive loss properties by sharply raising premiums
for owners of high-risk flood properties who refuse government assistance
designed to mitigate future flood losses. The bill would authorize
$200 million over the next five years for this effort.
The Senate version also contains a number of provisions aimed at
clarifying coverages purchased by policyholder; outlining the claims
process; providing a claims appeal process and establishing minimum
education and training requirements for agents selling flood insurance.
A similar House version passed in late 2003. Differences in the
House and Senate versions would have to be reconciled. As of April
2004 the legislation was pending in Congress.
Flood safety resources
Source: Reprinted from Best’s Review,
November 2000
Source: Federal Emergency Management Agency,
National Flood Insurance Program
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Repeat flood damage is estimated to cost the
NFIP about $200 million a year. |
Source: National Flood Insurance Program, www.fema.gov/news/disasters.fema
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