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Frequently Asked Questions:

• Who may purchase a flood insurance policy?
• How can property owners or renters find out if they are eligible to purchase flood insurance?
  
• How can a property owner determine if the property is in a Special Flood Hazard Area (SFHA)?
  
• What types of property may be insured against flood loss?
  
• What kinds of property are not insurable under the NFIP?
• Are there certain buildings that cannot be covered?
  
• How are flood insurance premiums calculated?
  
• Is the purchase of flood insurance mandatory?
  
• Why is my lender requiring the purchase of flood insurance?
  
• Are lenders required to escrow flood insurance payments?
  
• How many buildings or locations (and their contents) may be insured on each policy?
  
• What is the flood insurance policy term?
  
• Is there a minimum premium for a flood insurance policy?
  
• Is there a waiting period for flood insurance to become effective?
  
• Can flood insurance be cancelled at the request of the insured with a refund of premium?
  
• Is there a "grace period" for an insured under the NFIP policy conditions?

Who may purchase a flood insurance policy?
NFIP coverage is available to all owners of insurable property (a building and/or its contents) in a community participating in the NFIP. Owners and renters may insure their personal property against flood loss. Builders of buildings in the course of construction, condominium associations, and owners of residential condominium units in participating communities all may purchase flood insurance.

Condominium associations may purchase insurance coverage on a residential building, including all units, and its commonly owned contents under the Residential Condominium Building Association Policy (RCBAP). The unit owner may separately insure personal contents as well as obtain additional building coverage under the Dwelling Form as long as the unit owner's share of the RCBAP and his/her added coverage do not exceed the statutory limits for a single-family dwelling. The owner of a non-residential condominium unit may purchase only contents coverage for that unit. top

How can property owners or renters find out if they are eligible to purchase flood insurance?
NFIP coverage is available only in participating communities. Almost all of the nation's communities with serious flooding potential have joined the NFIP. The NFIP provides a listing of participating communities to the professionals here at API Group and we can provide you with the proper information  top

How can a property owner determine if the property is in a Special Flood Hazard Area (SFHA)?
FEMA publishes maps indicating a community's flood hazard areas and the degree of risk in those areas. Flood insurance maps usually are on file in a local repository in the community, such as the planning and zoning or engineering offices in the town hall or the county building. If you are curious, as one of the professionals here at Meridian. top

What types of property may be insured against flood loss?
Almost every type of walled and roofed building that is principally above ground and not entirely over water may be insured if it is in a participating community. In most cases, this includes manufactured (i.e., mobile) homes that are anchored to permanent foundations and travel trailers without wheels that are anchored to permanent foundations and are regulated under the community's floodplain management and building ordinances or laws. (However, this does not include converted buses or vans.) Contents of insurable walled and roofed buildings also may be insured under separate coverage. top

What kinds of property are not insurable under the NFIP?
Buildings entirely over water or principally below ground, gas and liquid storage tanks, animals, birds, fish, aircraft, wharves, piers, bulkheads, growing crops, shrubbery, land, livestock, roads, machinery or equipment in the open, and most motor vehicles are not insurable. Most contents and finishing materials located in a basement or in enclosures below the lowest elevated floor of an elevated building constructed after the FIRM became effective are not covered. (See "Coverage" section for coverage limitations in basements and below lowest elevated floors.) Information on the insurability of any special property may be obtained by contacting a property insurance agent or a broker. top

Are there certain buildings that cannot be covered?
Flood insurance is not available for buildings that the Administrator of FIA determines have been declared by a State or local zoning authority or other authorized authority to be in violation of State or local floodplain management regulations or ordinances. No new policies can be written to cover such buildings; nor can an existing policy be renewed.

New construction or substantially improved structures located within a designated Coastal Barrier Resources System (CBRS) area are not eligible for flood insurance, but existing structures that predate CBRS designation are eligible for flood insurance coverage. These areas are located in nearly 400 communities on the Atlantic and Gulf coasts and along the Great Lakes shores, and are delineated on the communities' flood maps. If, at the time of a loss, it is determined that a post-CBRS-designation building is located in a CBRS area, the claim will be denied, the policy canceled, and the premium refunded.  top

How are flood insurance premiums calculated?
A number of factors are considered in determining the premium for flood insurance coverage. They include the amount of coverage purchased; location; age of the building; building occupancy; design of the building; and, for buildings in SFHAs, elevation of the building in relation to the base flood elevation. Buildings eligible for special low-cost coverage at a pre-determined, reduced premium rate are single-family and one- to four-family dwellings located in Zones B, C, and X. For these exceptions, certain loss limitations exist. (See the "Flood Hazard Assessment and Mapping Requirements" section for definitions of flood zones.)

Is the purchase of flood insurance mandatory?
The Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 mandate the purchase of flood insurance as a condition of Federal or Federally related financial assistance for acquisition and/or construction of buildings in SFHAs of any community. The purchase of flood insurance on a voluntary basis is frequently prudent even outside of SFHAs.

The Acts prohibit Federal agency lenders, such as the Small Business Administration (SBA) and United States Department of Agriculture's (USDA) Rural Housing Service, and Government-Sponsored Enterprises for Housing (Freddie Mac and Fannie Mae) from making, guaranteeing, or purchasing a loan secured by improved real estate or mobile home(s) in an SFHA, unless flood insurance has been purchased, and is maintained during the term of the loan.

The Acts apply to lenders under the jurisdiction of Federal entities for lending institutions. These Federal entities include the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Comptroller of the Currency, the Office of Thrift Supervision, the National Credit Union Administration, and the Farm Credit Administration. The Acts also require Freddie Mac and Fannie Mae to implement procedures designed to ensure compliance with the mandatory purchase requirements of the Acts.

The purchase of flood insurance does not apply to conventional loans made by Federally regulated lenders when the community in which the building is located is not participating in the NFIP. Although Federal flood insurance is not available for new construction or substantially improved structures in CBRS areas, conventional loans may be made there by Federally regulated lenders. In these cases, the lending institution is required to notify the borrower that, in the event of a flood-related Presidentially declared disaster, Federal disaster assistance will not be available for the permanent repair or restoration of the building. Federally regulated or insured lending institutions are required in all cases to notify the borrower when the building being used to secure a loan is in an SFHA.  top

Why is my lender requiring the purchase of flood insurance?
For virtually every mortgage transaction involving a structure in the United States, the lender reviews the current NFIP maps for the community in which the property is located to determine its location relative to the published SFHA and completes the Standard Flood Hazard Determination Form (SFHDF). If the lender determines that the structure is indeed located within the SFHA and the community is participating in the NFIP, the borrower is then notified that flood insurance will be required as a condition of receiving the loan. A similar review and notification is completed whenever a loan is sold on the secondary loan market or perhaps when the lender completes a routine review of its mortgage portfolio. This fulfills the lender's obligation under the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 that requires the purchase of flood insurance by property owners who are being assisted by Federal programs or by Federally regulated institutions in the acquisition or improvement of land, or facilities, or structures located or to be located within an SFHA. top

Are lenders required to escrow flood insurance payments?
The statute requiring Federally regulated lenders, their services, and Federal Agency lenders to escrow for flood insurance became effective on October 1, 1996. If escrow for taxes, insurance, and/or other reasons is already required, escrow for flood insurance on loans secured by improved residential real estate or mobile homes is also required. Lenders who escrow will comply 100 percent with the statutory requirement by maintaining flood insurance during the term or life of the loan.

How many buildings or locations (and their contents) may be insured on each policy?
Normally, only one building and its contents can be insured on each policy. The Dwelling Form of the Standard Flood Insurance Policy does provide coverage for up to 10 percent of policy amount for appurtenant detached garages but not for carports, tool and storage sheds, and the like. In addition, the Scheduled Building Policy is available to cover 2 to 10 buildings. The policy requires a specific amount of insurance to be designated for each building, and all buildings must have the same ownership and the same location. top

What is the flood insurance policy term?
Flood insurance coverage is available only for a 1-year term.  top

Is there a minimum premium for a flood insurance policy?
There is a minimum premium for all flood insurance policies. Because the minimum premium is subject to change, if you are interested in purchasing a flood insurance policy should contact one of our professionals to obtain the current minimum premium amount.

Is there a waiting period for flood insurance to become effective?
There is normally a 30-day waiting period before flood insurance goes into effect. There are two exceptions:

If the initial purchase of flood insurance is in connection with the making, increasing, extending, or renewing of a loan, there is no waiting period. The coverage becomes effective at the time of the loan, provided the application and presentment of premium are made at or prior to loan closing.

If the initial purchase of flood insurance is made during the 13-month period following the revision or update of a Flood Insurance Rate Map for the community, there is a 1-day waiting period.
In addition to the two basic exceptions, the FIA has issued a policy decision specifying the following four exceptions:

1) The 30-day waiting period will not apply when there is an existing insurance policy and an additional amount of flood insurance is required in connection with the making, increasing, extending, or renewing of a loan, such as a second mortgage, home equity loan, or refinancing. The increased amount of flood coverage will be effective as of the time of the loan closing, provided the increased amount of coverage is applied for and the presentment of additional premium is made at or prior to the loan closing.

2)The 30-day waiting period will not apply when an additional amount of insurance is required as a result of a map revision. The increased amount of coverage will be effective at 12:01 a.m. on the first calendar day after the date the increased amount of coverage is applied for and the presentment of additional premium is made.

3)The 30-day waiting period will not apply when flood insurance is required as a result of a lender's determining a loan that does not have flood insurance coverage should be protected by flood insurance. The coverage will be effective upon the completion of an application and the presentment of payment of premium.

4) The 30-day waiting period will not apply when an additional amount of insurance offered in the renewal bill is being obtained in connection with the renewal of a policy. top

Can flood insurance be cancelled at the request of the insured with a refund of premium?
Flood insurance can be canceled, and a refund can be issued, only in certain circumstances, because all of the premium is fully earned on the first day of the policy term. Premium will be refunded on a pro-rata basis when the policyholder no longer owns or has an insurable interest in the insured property, provided no claim has been paid or is pending. There are other limited cancellation provisions for the refunding of premium. To discuss cancellation criteria and procedures, you should contact one of the professionals here at Meridian. top

Is there a "grace period" for an insured under the NFIP policy conditions?
All policies expire at 12:01 a.m. on the last day of the effective term. (For the ease and convenience of insurance agents and brokers, lenders, and policyholders, NFIP rules allow for "renewal" of expiring policies and no new application is required.) Coverage remains in force for 30 days after the expiration of the policy, and claims for losses that occur in the period will be honored providing the full renewal premium is received by the end of the 30-day period. Coverage also remains in force for any mortgagee named in the policy for 30 days after written notice to the mortgagee of the expiration of a policy.

Let one of our professionals assist you in your Flood Insurance evaluation as well as other services offered by our highly trained staff.