The National Flood Insurance Program

Flood insurance covers loss of insured property resulting directly from flooding. What is a flood?

"Flood" is defined in the Standard Flood Insurance Policy (SFIP), in part, as:

A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from overflow of inland or tidal waters, from unusual and rapid accumulation or runoff of surface waters from any source, or from mudflow.

Normal runoff resulting from rain and isolated incidence of seepage in basements when general flood conditions do not exist is not covered by federal flood insurance policies. Sewer backups are covered only when they are clearly a result of a general condition of flooding.

What is the National Flood Insurance Program?

The National Flood Insurance Program (NFIP) is a federal program enabling property owners in participating communities to purchase insurance protection against losses from flooding. This insurance is designed to provide an insurance alternative to disaster assistance to meet the escalating costs of repairing damage to buildings and their contents caused by floods.

Participation in the NFIP is based on an agreement between local communities and the federal government that states if a community will adopt and enforce a floodplain management ordinance to reduce future flood risks to new construction in Special Flood Hazard Areas (SFHAs), the federal government will make flood insurance available within the community as a financial protection against flood losses. Communities must apply to the program for citizens to become eligible to buy flood insurance policies.

How was the NFIP established and who administers it?

The U.S. Congress established the NFIP with the passage of the National Flood Insurance Act of 1968. The NFIP was broadened and modified with the passage of the Flood Disaster Protection Act if 1973 (http://www.fema.gov/pdf/nfip/floodact.pdf (opens in new window)) and other legislative measures. It was further modified by the National Flood Insurance Reform Act of 1994 (http://www.fema.gov/pdf/nfip/riegle.pdf (opens in new window)). The NFIP is administered by the Federal Emergency Management Agency (FEMA), a component of the Department of Homeland Security.

What is a Special Flood Hazard Area (SFHA)?

In support of the NFIP, the Federal Emergency Management Agency (FEMA) has undertaken a massive effort of flood hazard identification and mapping to produce Flood Hazard Boundary Maps (FHBMs), Flood Insurance Rate Maps (FIRMs), and Flood Boundary and Floodway Maps (FBFMs). Several areas of flood hazards are commonly identified on these maps.

One of these areas is the Special Flood Hazard Area (SFHA), which is defined as an area of land that would be inundated by a flood having a 1-percent chance of occurring in any given year (also referred to as the base flood). The 1-percent-annual-chance standard was chosen after considering various alternatives. The high-risk area standard constitutes a reasonable compromise between the need for building restrictions to minimize potential loss of life and property and the economic benefits to be derived from floodplain development. Development may take place within the SFHA, provided that development complies with local floodplain management ordinances, which must meet the minimum federal requirements. Flood insurance is required for insurable structures within the SFHA to protect federal financial investments and assistance used for acquisition and/or construction purposes within communities participating in the NFIP.

What is the NFIP's Write Your Own Program?

The Write Your Own Program (WYO) allows participating property and casualty insurance companies to write and service the Standard Flood Insurance Policy in their own names. The companies receive an expense allowance for policies written and claims processed while the federal government retains responsibility for underwriting losses. The WYO Program operates within the context of the NFIP, and is subject to its rules and regulations.

A list of insurance companies that participate in the WYO Program are available on the NFIP Web site at http://www.fema.gov/business/nfip/wyo.shtm.

If your agent or insurance company is not in the WYO Program you may be referred to another agent or insurance company involved in the program.

Does the Wisconsin Office of the Commissioner of Insurance (OCI) have any jurisdiction over the NFIP in their respective states?

As established by the U.S. Congress, the sale of flood insurance under the NFIP is subject to the rules and regulations of FEMA. FEMA has elected to have state-licensed insurance companies' agents and brokers sell flood insurance to consumers. OCI holds the insurance companies' agents and brokers accountable for providing NFIP customers with the same standards and level of service that it requires of them in selling their other lines of insurance.

Private insurance companies participating in the Write Your Own (WYO) Program must be licensed and are regulated by the OCI to engage in the business of property insurance in Wisconsin in order to sell flood insurance.