Flood Insurance NATIONAL FLOOD INSURANCE PROGRAM

Flood damage is excluded under standard homeowners and renters insurance policies. Flood coverage, however, is available in the form of a separate policy both from the National Flood Insurance Program (NFIP) and from a few private insurers.

Congress created the NFIP in 1968 in response to the rising cost of taxpayer-funded disaster relief for flood victims and the increasing amount of damage caused by floods. The NFIP makes federally backed flood insurance available in communities that agree to adopt and enforce floodplain management ordinances to reduce future flood damage. The NFIP is self-supporting for the average historical loss year. This means that unless there is a widespread disaster, operating expenses and flood insurance claims are financed through premiums collected.

The NFIP provides coverage for up to $250,000 for the structure of the home and $100,000 for personal possessions. Private flood insurance is available for those who need additional insurance protection, known as "excess coverage,” over and above the basic policy or for people whose communities do not participate in the NFIP. Some insurers have introduced special policies for high-value properties. These policies may cover homes in noncoastal areas and/or provide enhancements to traditional flood coverage. The comprehensive portion of an auto insurance policy includes flood damage.

A 2008 poll by the Insurance Information Institute found that only 17 percent of Americans have a flood insurance policy, ranging from 15 percent in the West to 17 percent in North Central States and the South to 20 percent in the Northeast.


* By July 2008, 91 insurance companies participated in the "Write-Your-Own" Program, started in 1983, in which insurers issue policies and adjust flood claims on behalf of the federal government under their own names.

NATIONAL FLOOD INSURANCE PROGRAM, 1980-2008


Losses paid
Year Policies in force
at the end of year Number Amount ($000)
1980 2,103,851 41,918 $230,414
1985 2,016,785 38,676 368,239
1990 2,477,861 14,766 167,920
1995 3,476,829 62,441 1,295,581
2000 4,369,087 16,362 251,719
2004 4,667,446 55,762 2,226,942
2005 4,962,011 211,954 17,646,657
2006 5,514,895 24,562 638,824
2007 5,655,919 23,003 607,055
2008 5,687,293 61,433 2,584,241

Source: U.S. Department of Homeland Security, Federal Emergency Management Agency.


*
In 2008 the average amount of flood coverage was $210,683 and the average premium was $542.
*
The average flood claim in 2008 was $42,066, up from $26,390 in 2007.
*
NFIP premiums written rose from $1.7 billion in 1999 to $3.1 billion in 2008.
*
Flood loss payments totaled $2.6 billion in 2008. In 2005 loss payments totaled $17.6 billion, the highest amount on record, including losses from hurricanes Katrina, Rita and Wilma.