FLOOD ZONES
Special flood hazard areas are designated by the Federal Emergency Management Agency (FEMA) and are delineated on Flood Insurance Rate Maps (FIRMs), published by FEMA.
Congress created the National Flood Insurance Program (NFIP) in 1968 to reduce future flood damage through flood plain management and to provide people with flood insurance through individual agents and insurance companies. FEMA defines a flood as a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or two or more properties from:
- overflow of inland or tidal waters;
- unusual and rapid accumulation of runoff of surface waters from any source
- mudflows; or
- collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood.
The majority of real estate lenders will require flood insurance coverage for the amount of the loan. Typically, this is a requirement prior to granting the loan when properties a in a flood zone. It should be noted that even if the property is not currently in a flood zone but FEMA subsequently places it within a flood zone through a map change or a flood even occurs, a lender may subsequently come back to the borrower and impose the requirement for flood insurance. This would now result in an unanticipated charge to the borrower. A standard flood insurance policy is considered a single-peril (flood) policy that pays for direct physical damage to the insured property up to the replacement cost or actual cash value (ACV) of the actual damage or the policy of liability, whichever is less.
What is Covered by Flood Insurance and What is Not Covered?
Generally, physical damages to buildings or personal property “directly” caused by a flood are covered by flood insurance. FEMA encourages that people have both building and personal property coverage.
What is Insured Under Building Property Coverage?
· The insured building and its foundation.
· The electrical and plumbing systems
· Central air conditioning equipment, furnaces, and water heaters
· Refrigerators, cooking stove, and built-in appliances
· Permanently installed carpeting over an unfinished floor
· Permanently installed paneling, wallboard, bookcases, and cabinets
· Window blinds
· Detached garages (up to 10% of building property coverage)
· Debris removal
What is not Insured under Building Property Coverage?
· Damage caused by moisture, mildew, or mold that could have been avoided by the property owner.
· Currency, precious metals, and valuable papers, such as stock certificates
· Property and belongings outside of a building such as trees, planters, wells, septic systems, walls decks, patios, fences, seawalls, hot tubs, and swimming pools.
· Living expenses, such as temporary housing
· Financial loss caused by business interruption or loss of use of insured property
· Most self-propelled vehicles, such as automobiles
(from Kaplan Professional Schools,
