How Does the National Flood Insurance Program Work?

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The National Flood Insurance Program (NFIP) is an insurance coverage network that provides flood insurance to property owners, renters, and businesses who live in one of 23,000 participating communities. Managed by the Federal Emergency Management Agency (FEMA), this program targets areas that are at high-risk for natural disaster and aims to help reduce the socio-economic impact of floods by encouraging communities to adapt and enforce floodplain management regulations that help mitigate the effects of flooding.
As the nation’s leading form of flood insurance, the NFIP has more than five million policyholders nationwide and provides nearly $1.3 trillion in coverage against floods. Interested in enrolling? Here’s everything you need to know about the National Flood Insurance Program.

Should you enroll in the National Flood Insurance Program?

Floods are catastrophic events that can occur anywhere at any time, regardless of your area’s flood risk level. According to FEMA, just one inch of floodwater can cause up to $25,000 in damage, depending in the location and value of your home. Forbes also notes that more than 20% of flood insurance claims occur outside a high-risk flood zone, so it may be in your best interest to purchase a flood insurance add-on to recover faster when floodwaters recede regardless of your area’s risk level.
If you have a mortgage with a government-backed loan and live in a high-risk area, you will be required to purchase flood insurance from the NFIP or a private insurance firm.
Additionally, if you have previously received federal disaster relief via grants from FEMA or low-interest disaster loans from the U.S. Small Business Administration (SBA), you must take out a flood insurance policy in order to receive aid in the event of another emergency. Some lenders may require flood insurance regardless of risk level, as the cost of repairing flood damage can be incredibly high and threaten the very foundation of your home.
All properties are vulnerable to flooding. Because most home insurance policies do not cover these types of damages, purchasing an additional policy is the only way to protect your personal belongings and receive reimbursement in the event of an emergency. The NFIP provides customers with up to $100,000 in repair/replacement costs, which is certainly a large help when you are faced with a stressful financial situation.
If you’re interested in purchasing a policy, you can learn more and find a provider on the FEMA website.

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