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Understanding the Unique Facets of Flood Insurance

Author: Chris Boggs

"I don't need flood insurance, I'm not in a 'flood zone.'" Or, “I don't need flood insurance because my mortgage company said I don't need it." These statements are made more often than any insurance agent would like to admit, but the frightening part is that some agents might agree with the statements without questioning or understanding the potential fallacy within both.

Every structure located in one of the more than 21,000 NFIP- participating communities is in a “flood zone." These “flood zones" are located in all 50 states, DC and five territories or possessions; however, the insured's house or building may simply not be in one of the “high hazard" zones.

What the client is really trying to say is, “I don't need flood insurance because I'm not in a Special Flood Hazard Area (SFHA)." The reality is that the client just doesn't know the correct terminology; but agents must know the reality and be able to effectively and tactfully correct the client when discussing the need for flood coverage. But more importantly, the insured must realize that being located outside a SFHA does not guarantee freedom from the possibility of flood loss.

Other often used misnomers in news reports and newspapers are statements such as “100-year flood plain," or the “100-year flood event." Although the creation and use of both terms makes some relative sense based on the statistical calculations used to establish these hazardous flood areas— both give the wrong impression of the true flood risk. Furthermore, “flood zone," “100-year flood plain," and “100-year flood event," although favored by the media and perpetuated by property owners (and some agents), are over-simplified attempts to describe Special Flood Hazard Areas (SFHAs) and are incorrectly applied to the true flood exposure.

Defining Special Flood Hazard Areas (SFHAs)

A Special Flood Hazard Area (SFHA) is defined as an area having a one percent (1%) chance of being inundated by flood waters in any given year (thus the creation and misuse of the term “100-year flood plain"). Flood waters have an equal chance of submerging these areas every year for 5 straight years, or not for 200 years; there is simply a one percent statistical possibility every year. Homes located in SFHAs have a 26 percent chance of suffering flood damage during a normal 30-year loan according to FEMA.

There are two broad classifications of SFHAs: 1) “A" zones and 2) “V" zones. Further information about these zones can often be found within the Flood Insurance Rate Maps (FIRMs). Detailed information about each of the Special Flood Hazard Area subclassifications can be found on FEMA's website.

What Makes a “V" a “V"?

Differentiating between “A" zones and “V" zones is relatively simple: “V" zones are generally located near areas subject to hazardous tidal flows (waves) such as the ocean. “A" zones are those areas subject to inundation by overflow of rivers, low-lying areas subject to ponding, etc. “V" can be imagined to signify “velocity"; the water is flowing with the increased hazard and damage of wave action. “A" can represent “altitude;" the water goes up and goes back down, but it lacks most of the damaging wave action found in a “V" zone.

When reviewing a coastal Flood Insurance Rate Map (FIRM), it is common to find “V" zones morph into “A" zones. Both areas are still Special Flood Hazard Areas, but there's a difference in the supposed hazard and potential damage leading to different rating criteria. A common question is, “How is that point decided? Where does a 'V' become an 'A'?"

To establish the transition point, engineers must calculate two heights: 1) the “1%" or “100-year" still-water height and 2) wave heights above the still-water height. Wave height decreases the further up the shore the water moves; when the anticipated height of the tidal wave falls to less than 3 feet above the “100-year" still-water height, the “V" zone ends and the “A" zone begins. “Base Flood Elevation" (BFE) and “100-year" still-water height are not synonymous. The BFE includes some wave action in its calculation.

Agents who write flood coverage do not necessarily need this information for rating purposes, but it is essential to understand the differences and the reasons for them when discussing coverage and rating with a client. Removing some of the mystery in flood insurance can put the client more at ease.

“A" and “V" Zone Differences

“A" zones and “V" zones differ in two primary areas: 1) reference point, and 2) acceptable means of elevating the structure. 

Reference Points

Reference points used for rating policies in Special Flood Hazard Areas differ depending on a structure's zonal location. “A" zones use the bottom of the first elevated floor as the reference point for calculating the height above (or below) Base Flood Elevation. However, “V" zones use the bottom of the lowest horizontal support for the measuring point. “V" zone reference points could be as much as 18 inches to 2 feet lower than “A" zone reference points. But why is the bottom of the lowest horizontal support used in a “V" zone? Because of the damage potential presented by wave action.

Elevating Methods

“A" and “V" zones also differ regarding the acceptable means for elevating the structure. Structures located in “A" zones may be elevated above Base Flood Elevation (BFE) either by pilings, columns, shear walls, or a solid foundation perimeter wall with appropriate openings.

Proper openings in a solid foundation perimeter wall for structures located in an “A" zone allow for the free passage of water into and out of the building without requiring human intervention to open or close. Other NFIP requirements for these openings include: 1) a minimum of two openings on different sides of each enclosed area, 2) at least one square inch of opening for each square foot of enclosed space, 3) the bottom of the openings can be no more than one foot above the grade immediately below the vent, and 4) windows, doors, and garage doors are not considered proper openings (they require human intervention). If the “A" zone structure lacks sufficient openings as defined, the reference point becomes the ground beneath the structure.

Pilings, columns, shear walls, or “breakaway" walls are the only NFIP allowable method for elevating a structure in “V" zones.

  • Shear Wall – A shear wall is a structural support running parallel (as nearly as possible) to the flow of the water. These walls are not structurally joined at the ends allowing for water to flow through unimpeded.
  • Breakaway Walls – Breakaway walls are non-structural walls perpendicular to the flow of water (taking the direct hit) designed to fail under certain wave force conditions. The failure of these walls should cause no damage to the structural supports, the foundation, or any part of the building above the walls.

Supposed “Non-hazardous" Flood Zones

Non-special flood hazard areas (non-SFHAs), historically delineated using “B," “C," or “X," are considered areas of moderate or minimal hazard generally only expected to flood in times of severe storms or when drainage problems exist. However, FEMA states that 25 percent to 30 percent of all flood insurance claims are paid in these “less hazardous" areas; so, neither insureds nor agents should ignore flood insurance just because the property is not in areas considered “hazardous."

Zones historically labeled “B" or “C" are being replaced with variations of “X." As Flood Insurance Rate Maps (FIRMs) are updated, non-SFHAs will be assigned a “Shaded X" (previously a “B") or simply an “X" (previously a “C"). Base Flood Elevations are not indicated in either “X" zone.

“Shaded X" zones correspond to areas with a higher probability of flooding (moderate hazard) than areas tagged by an unshaded “X" (minimal hazard). A “Shaded X" indicates the area has a 0.2 percent annual chance of flooding (the “500-year" flood line) or a one percent chance of experiencing flooding of less than one foot in any given year (not high enough to be classified as a Special Flood Hazard Area).

Agents with clients depending on Difference in Condition (DIC) policies to provide flood coverage must pay close attention to the flood coverage exclusions found within the DIC policy. Some DIC forms exclude flood outright or increase the flood deductible to match the maximum available coverage offered by NFIP policies for structures located in Special Flood Hazard Areas (“A" and “V" zones) and Shaded “X" zones. This “Shaded X" wording is often thrown into the DIC without the agent's or insured's knowledge. If such limitation cannot be negotiated out, then the insured must be informed, and any structures located in “Shaded X" zones must be covered by an NFIP policy.

Areas where the flood hazard is undetermined are shown on the FIRM as a zone “D." This zone may also be used when one community incorporates portions of another community where no map has been previously prepared.

Zone Lines: More than One Zone

Flood zones do not follow property boundary lines; they are a function of the water source, protective measures, erosion, drainage, and other hydrological factors. Zones may change in the middle of an individual's yard or in the middle of the living room. Questions often arise as to when the more hazardous zone must be used.

When any part of the structure or its permanent, real-property attachments is dissected by the zone line, even if it is a part of the structure not covered by the flood policy, the more hazardous zone is applied. Even if the deck attached at the rear of the house is partially in an “A" zone and partially in an “X" zone, the entire house is rated in the “A" zone, even though the deck is not covered by the flood policy.

If the line is in the back yard, rating is based on the zone in which the house and its real property attachments is located. It is not the zone of the land that matters; it is the zones in which the structure itself is located.

Flood Policy Forms

Compared to more common property insurance policies, National Flood Insurance Program (NFIP) policy forms are quite intriguing. First, the Federal government wrote them; and second, they use terms and conditions not found in other property policy forms. The three NFIP coverage forms are highlighted in the following paragraphs.

Three Policy Forms

Each Standard Flood Insurance Policy (SFIP) form issued by the Federal Emergency Management Agency (FEMA) specifies the terms, conditions, and agreement between FEMA (as the insurer) and the named insured. Major provisions are essentially the same among the three forms with the only differences being the qualifications for coverage, the limits available and the property valuation methods applied.

Dwelling Form

Approximately 85 percent of current NFIP policies are written using the dwelling form. It is designed for one- to-four-family structures primarily occupied as a residence. Homeowners, residential renters, owners of two-to-four-unit residential structures, residential townhouse or row house owners, and the owner of an individual unit in a condominium building are eligible for the dwelling form.

Property insured on the dwelling form is valued at replacement cost provided two requirements are met:

  • Property is insured to at least 80 percent of its value or the maximum coverage available—whichever is less; and
  • The insured lives in the residence at least 80 percent of the year.

If either of these requirements is not met, the most the insured is going to receive is the property's actual cash value (ACV).

Although the policy states that replacement cost is paid if 80 percent of the value is carried, this is not a coinsurance form, it is an “insurance-to-value" form. Like the homeowners' form, the SFIP dwelling form pays the greater of actual cash value or the amount developed in the insurance-to-value calculation; but only if the insured lives at the residence 80 percent of the year. If both conditions are not met, losses are paid at actual cash value. These caveats are why this is not the equivalent of a coinsurance form.

In regular program communities, coverage for buildings and contents is limited to a specified maximum. Current (as of August 2021) maximum limits are $250,000 on the structure and $100,000 on contents (which applies to renters as well).

General Property Form

Owners or lessees of “other residential" and nonresidential structures or units are eligible for protection under the General Property Form. Residential structures with five or more units, hotels or motels, apartment buildings, cooperative condominiums, assisted living facilities and dormitories are examples of “other residential" structures insurable on the general property form. Nonresidential structures, as is evidenced by the name, are any structures where people do not live and includes stores, office buildings, manufacturing facilities, warehouses, churches, schools, detached garages, commercial condominiums, and any other eligible structure not normally considered a place of residence.

Structures and contents insured on the general property form are valued at actual cash value with no other option available.

Maximum limits differ depending on the classification of the structure. “Other residential" structures are limited to a maximum of $500,000 on the structure and $100,000 on the contents. Nonresidential structures are eligible for maximum limits up to $500,000 on the building and another $500,000 for the contents. (As of August 2021.)

Residential Condominium Building Association Policy (RCBAP)

The Residential Condominium Building Association Policy (RCBAP) provides building coverage and, if desired, can be used to provide contents coverage for common use personal property for residential condominium buildings, provided 75 percent or more of the building is residential use. Coverage is written in the name of the association for the benefit of the association and the unit owners. Only buildings with a condominium form of ownership are eligible for this coverage form. The unit owners must take title and deed to specific units.

Cooperative condominiums are not eligible for the RCBAP as title to a specific unit is not passed to the occupier of the unit; an “owner" buys stock in the cooperative and is allowed to live in a particular unit (based on the amount of stock purchased). Timeshare buildings may be eligible for the RCBAP if condominium-style ownership is offered in jurisdictions which allow that title to individual units be vested in the owners' names (a fee simple-type arrangement allowing the title to be transferred to heirs).

Property insured on the RCBAP is valued at replacement cost. In fact, this is the only form that offers a true insurance-to-value (coinsurance) clause similar to the homeowners' or commercial property policy.

Much higher limits are available for buildings insurable under the RCBAP. Up to $250,000 per unit, per building is available. For example, an insured can purchase up to $2.5 million in protection for a 10-unit building. Coverage for commonly owned personal property is limited to $100,000 per building.

Participating Communities in the Regular Program

Two requirements must be met before owners or lessees can avail themselves of the flood coverage offered by NFIP

  • The structure must be in a participating community (currently over 21,000); and
  • The community must have transitioned into the Regular Program.

A participating community is one that: 1) has been notified by FEMA through the Federal Insurance and Mitigation Administration (FIMA) that there are flood-prone areas within the community (usually resulting from previous floods); 2) has been notified of the location of those areas by publication of a Flood Hazard Boundary Map (FHBM); 3) within one year of notification agrees to join NFIP; and 4) agrees to participate in the development of local flood plain management guidelines. Being labeled a participating community is the first step toward becoming a regular program community.

Immediately following a community's decision to participate with NFIP, the emergency program is made available to residents and businesses within the community. During the emergency program phase, very limited amounts of coverage are available:

Property TypeStructure MaximumContents Maximum
1 to 4 Family Residences$35,000$10,000
Other Residential Structures$100,000$100,000
Non-Residential Structures$100,000$100,000

Regular Program

Moving from the emergency program to the regular program requires completion of a more detailed flood insurance study (FIS) by FIMA (not FEMA) and the Army Corps of Engineers, more clearly defining the community's flood hazards. Simultaneously, the community, in conjunction with FEMA, is developing and codifying the flood plain ordinances and laws to regulate construction and maintenance in the various flood zones and flood ways.

After the flood insurance studies are completed and FEMA is satisfied with the locally adopted flood plain management ordinances, the community moves to the regular program. Once the community enters the regular program, the higher limits presented previously become available.

Flood Plain Management in the Regular Program

Flood plain management is the responsibility of the local community. Reviewing and updating existing laws are solely the duty of the participating community; FEMA does not take part in this process. However, if the community fails to comply with its own flood plain management requirements, FEMA may place the community on probation for one year.

During the probationary year, a $50 surcharge is tacked onto every flood policy within in that community: 1) to help finance the increased risk the community is presenting the program and 2) as a political move to encourage policy holders to call the community officials to push for resolution of the problems to end the probation.

The community is no longer considered a “participating community" because they are not considered to be working with FEMA to mitigate losses. If deficiencies are not corrected within the one year probation period, the community is suspended and no NFIP-backed flood policies can be written or renewed.

Community Rating System (CRS)

NFIP participating communities have the option to participate in the Community Rating System (CRS), a voluntary program implemented by NFIP in 1990. Any participating community in full compliance with the minimum floodplain management requirements can apply to join the CRS.

To qualify for any available CRS discounts, the community must undertake and execute measures beyond those contained within the minimum floodplain management requirements. The CRS uses rate credits to recognize and encourage community and state activities that go beyond the minimum required by the

NFIP to:

  • Reduce and avoid flood damage to insurable property. The CRS encourages communities to map and provide regulatory flood data for all their flood hazards. Standards higher than those set out in the minimum criteria of the NFIP are generally required.
  • Strengthen and support the insurance aspects of the NFIP. Communities are encouraged to implement mapping and information programs that help assess individual property risk and reduce repetitive flood losses and make their residents aware of their flood risk  
  • Foster comprehensive floodplain management. Communities are encouraged to use all available tools to implement comprehensive local floodplain management programs with concerns beyond the protection of insurable property. This comprehensive approach includes planning, public information, regulations, financial support, open space protection, public works activities, emergency management, and other appropriate techniques.

Before a community can be recognized in the insurance rating system, local floodplain management activities must be described, measured, and evaluated by the CRS. A community receives a CRS classification based upon the total credit for its activities. Ratings range from 1 to 10 based on the points earned. A CRS rating of “1" receives the most credit and a CRS rating of “10" results in no credit.

CRS ClassPremium Reduction


Properties located outside SFHAs are subject to lower discount percentages because the premiums are already lower due to the location/rating zone. Preferred Risk Policies are not eligible for CRS premium discounts because these policies are already discounted.

Policy Terms and Conditions Unique to Flood Coverage

Terms and conditions peculiar to NFIP policies have evolved, changed, and been added since the plan's formation in 1968. Many of these changes have result from inflation (such as increasing limits), some the result of actual problems, and still others the product of anecdotal evidence (such as the waiting period change). Several definitions and provisions unique to flood insurance are highlighted in the following paragraphs.

Waiting Period

All new NFIP flood policies are subject to a 30-day waiting period (with some exceptions). This mandated waiting period applies to both direct policies and policies written through a Write Your Own (WYO) carrier. Tolling of the 30-day waiting period begins once the application and the estimated premium are received as follows:

  • From the date of the application if the application and premium payment are received within 10 days of the date on the application; or if the premium and application are mailed via U.S. Postal Service certified mail within 4 days of the application.
  • From the date of receipt at the NFIP if the application and payment are not received within 10 days of the date on the application; or if the premium and signed application are not mailed via certified mail within 4 days of the date on the application.

Note: The waiting period countdown does not begin until the estimated premium is received.

Losses in progress on the effective date are excluded from coverage. A delay in mailing the application and premium could be the difference between a flood loss being covered and being excluded.

Exceptions to the 30-day waiting period for individual or entity coverage are:

  • Renewals – No waiting period provided renewal premiums paid;
  • Loan closings – effective at the time closing papers are signed (no waiting period);
  • Revision or updates to a FIRM – 1-day waiting period during the 13 months following the revision; and
  • Properties subject to the post-wildfire exception. Coverage becomes effective immediately if the covered property experiences damage caused by flood that originated on federal land, post-wildfire conditions on federal lands caused or worsened the flooding; and the insured purchased the policy before the fire containment date or during the 60-calendar day period following the fire-containment date.

Thirty-day elimination periods also apply to endorsements requesting an increase in coverage or a decrease in the deductible. Requests for decreases in coverage or increases in deductible are processed immediately upon receipt.

Direct Loss Only

Standard flood insurance policies cover only direct losses suffered by the insured. There is no provision to pay indirect losses. A direct loss is the actual damage to the real and/or personal property resulting from a covered cause of loss (flood). Indirect loss is the increase in expenses or loss of income created by the direct loss.

Excluded are any additional living expenses incurred while the dwelling is being repaired, as well as any loss of income a business suffers due to the inability to occupy and/or operate the business. Any outlay not directly related to repair or replacement of the damaged property is an out-of-pocket indirect expense for the homeowner. Unrealized income resulting from flood damage is a business's out-of-pocket, indirect cost of a flood.


NFIP policies apply deductibles separately to each class of property insured. The insured pays two deductibles following a loss: one for the real property and a second for personal property.

Separate deductibles based on type of property insured is contrary to the homeowners' and the commercial property policies' application of the deductible. Deductibles in these common property policies apply to the loss, not the class of property. Thus, the insured is only responsible for one deductible regardless of the class of property damaged or destroyed rather than two as required by the NFIP policy.

Standard NFIP deductibles and rate credits for the various deductible options can be found on FEMA's website. Factors and credits are based on:

  • The flood zone,
  • A structure's status as Pre-FIRM or Post-FIRM,
  • The classification of the structure (residential, other residential, nonresidential), and
  • The type of property insured: building or contents.

Increased Cost of Compliance

Increased Cost of Compliance (ICC) found in Coverage D is mandatory on all three standard flood insurance policy forms in regular program communities. ICC coverage is not available for structures in emergency program communities or for individual units in a residential condominium association.

Communities which have adopted flood plain management requirements within their ordinance or law provisions may require certain structures to be altered or removed following flood damage. Such consequential expense is only available through Coverage D. ICC coverage will pay the additional costs to:

  • Elevate the structure as required by local code;
  • “Flood proof" the structure;
  • Relocate the structure; or
  • Demolish the structure.

The $30,000 ICC limit is paid in addition to the amount of direct flood damage. However, FEMA's payment will never exceed the maximum available coverage, even when ICC coverage is added. For example, the insured purchases the maximum amount of dwelling coverage available in the dwelling form—$250,000; if there is a $245,000 direct loss, the maximum coverage available under the ICC extension is $5,000, regardless of the total cost to comply with an ordinance or law. This explains why the premiums for ICC coverage decrease after the dwelling limit surpasses $230,000 for residential structures and $480,000 for nonresidential structures.

To be eligible for ICC coverage, the structure must meet one of two requirements (in addition to those previously discussed):

  • The structure must be a “repetitive loss structure" for which NFIP has paid a previous qualifying claim in addition to the current damage; or
  • The structure must sustain “substantial" flood damage (“substantial" is defined in a subsequent section).

Reduction in or Reformation of Coverage

Flood policies can be “re-formed" and the limits reduced after the loss if the premium paid is not sufficient to cover the amount of coverage requested. Such issues can result from various causes, including 1) the difference between the Base Flood Elevation (BFE) and the reference point is miscalculated, or 2) the completion of structural changes moving the reference point to a lower level (such as by enclosing the area under an elevated floor in a Flood Zone “A").

If the deficiency is discovered by or reported to FEMA prior to the loss, the insured is given 30 days to pay the difference between the 1-year premium paid and the correct policy-year premium based on actual rating information. However, if the discrepancy is found at the time of the loss, the insured is allowed 60 days to cover the difference in paid and actual premium for the last 2 policy years. The “2 policy year" requirement is found within the three standard coverage forms, however, NFIP rules state that the additional premium is only required for the current policy term (“This is an exception to the SFIP provisions requiring additional premium for the current and the prior policy terms.")

Potentially severe penalties apply if the insured does not or cannot pay the additional premium. Insureds unable or unwilling to pay the difference will see the limits on their policy reduced to match the amount of coverage available based on the premium paid.

Unique Flood Policy Definitions

Flood: All three NFIP policies define flood as: A general and temporary condition of partial or complete inundation of two or more acres (general) or two or more properties (at least one of which is the policyholder's property) of normally dry land area (temporary) from the:

  • Overflow of inland or tidal waters,
  • Unusual and rapid accumulation or runoff of surface waters from any source, or
  • Mudflow.

Flood also includes the 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 as defined above. Four concepts on which to focus in this definition are:

  1. The definition states “two or more properties…". It does not state “structures" or who the owner of the second property must be. If the contiguous flood crosses onto another's property, the inundation qualifies as a “flood."
  2. The “Southfork Ranch" provision (where the Ewings lived in TV's Dallas). Insureds who own a large amount of land may never qualify for coverage without this two-acre provision.
  3. Mudflow in the flood policy is not synonymous with mudslide. It means a river of liquid and flowing mud on the surfaces of normally dry land areas.
  4. The collapse or subsidence of land does not mean erosion over long periods of time; this is sudden erosion caused by the inundation by flood waters.

Basement: Any area of the building, including any sunken room or sunken portion of a room, having its floor below ground level (sub-grade) on all sides. A very important definition because there is no coverage for any personal property located in a basement, regardless of the flood zone. Overall, there is very limited coverage for property in a basement. Some coverage is extended to property necessary for the operation of the structure and attached to a power source such as electrical equipment (outlets, switches, junction boxes, and circuit breakers), HVAC and AC systems, water heaters, pumps, clothes washers and dryers, and freezers (not walk-in).

Coverage for real property in basements is limited to: 1) Drywall for walls and ceilings in a basement to include the cost of labor to nail it, unfinished, un-floated and not taped, to the framing, 2) elevators, dumbwaiters, and related equipment, except for related equipment installed below the Base Flood Elevation after September 30, 1987, 3) nonflammable insulation in a basement, 4) stairways and staircases attached to the building, not separated from it by elevated walkways and 5) footings, foundations, posts, pilings, piers, or other foundation walls and anchorage systems required to support a building.

A "basement" is a basement in the NFIP policy only when the area is below ground level on all sides. Walkout basements not requiring a step up to grade are not considered a basement by definition; that is just the first floor and the reference point for flood rating purposes.

Conversely, the building may be above grade but have an area that is dug into the ground making that area below grade and a basement by definition. Coverage for property in such areas is limited as detailed above. Examples may include a sunken living room or a recessed production area.

Sunken living rooms were fashionable in the 1970s and are returning to vogue in some areas of the country. If these areas are below grade even though the rest of the house is above, they are considered basements and none of the property located in them is covered for damage resulting from flood.

Recessed production areas may be necessary due to the weight of the equipment or the process of manufacturing. Such large scale operations may require some excavation to assure the production floor is on solid footing. If the area is below grade on all sides due to this excavation, it is considered a basement; there will be no coverage for the machinery or equipment in such areas.

Note: Sometimes, computer rooms are moved to a basement due to the need for security, segregation, or to avoid damage by sprinkler leakage. None of the computer equipment kept in these areas is covered by the NFIP policy if flood damage occurs.

Elevated Building: A non-basement building with its lowest elevated floor raised above ground level by foundation walls, shear walls, posts, piers, pilings, or columns. Personal property and real property located below the reference point in an elevated structure are subject to the same conditions and limitations as property located in a basement. Additional problems are created if the reference level is altered in an elevated structure.

Pre-FIRM and/or Post FIRM: These terms describe the date construction or substantial improvement was completed compared against the date the initial Flood Insurance Rate Map (FIRM) was effective.

  • Structures completed or substantially improved prior to the issuance of the community's first FIRM are considered Pre- FIRM; and
  • Structures completed or substantially improved after the issuance of the community's first FIRM are considered Post-FIRM.

Rates differ based on a structure's classification as Pre-FIRM or Post-FIRM. Grandfather laws are also affected by Pre- or Post- FIRM designations.

Post-FIRM structures must comply with the floodplain management requirements and the FIRM in effect at the time of construction. Nothing should be done to the structure to alter it in violation of the subject FIRM.

Grandfather Laws: These rules were established for the benefit of policyholders who have either built in compliance with the FIRM in effect at the time of construction, and/or have maintained continuous coverage. Insureds qualifying under Grandfather Laws have the option of using the most favorable rating data, either: 1) the most recent Flood Insurance Rate Map (FIRM), or 2) the rating criteria in effect when the structure was built or coverage was first obtained. The ability to procure coverage based on prior rating criteria is extremely important in at least three situations:

  • The structure is remapped into a Special Flood Hazard Area where it was previously part of a non-special flood hazard area (flood insurance may be required by the mortgagee where it wasn't before);
  • The Base Flood Elevation (used for rating) changes. The difference between the BFE and the reference point may be less, or the reference level may even move to below the BFE as a result of the remapping, exponentially increasing the cost of flood coverage; or
  • The expansion of Coastal Barrier Resource System areas.

Qualifications under Grandfather Laws differ based on the insured's history of flood coverage. Insureds already covered by an NFIP policy need only meet a short list of requirements to qualify for Grandfather status:

  • The structure must have been built in compliance with the FIRM in effect at the time of construction;
  • Flood coverage must have been continuous; and
  • No alterations can have been made changing the reference level.

If there has not been previous flood insurance or a prior policy was not renewed, the structure owner can still qualify, but the requirements are a bit more stringent. Rates can be based on the FIRM and Base Flood Elevation in effect when the building was constructed provided:

  • Proper documentation is submitted indicating the date of the FIRM (when constructed) and the Zone applied at the time of construction;
  • It can be proven through documentation from a community official that the building was constructed in compliance with the map and flood plain management requirements in effect at the time it was built; and
  • Proof is supplied that the building has not been altered in any way that would or could have changed the original reference point level.

Two actions of the building owner will negate the ability to qualify for the preferred rates offered by Grandfather Laws:

  • If an elevated building is altered changing the reference level to below the Base Flood Elevation, or
  • The building undergoes substantial improvement or suffers substantial damage (both terms defined elsewhere in this article).

A campaign of remapping and updating FIRMs is underway due to outdated information on current Flood Insurance Rate Maps. Development, updated flood protection, and even inadequate flood protection are driving the need for this remapping. More insureds may be pulled into Special Flood Hazard Areas. As remapping continues, understanding Grandfather Laws is going to become more important for agents.

Substantial: FEMA defines substantial to mean an amount that exceeds 50 percent of the structure's market value. This applies to “Substantial Improvement" and “Substantial Damage."

  • Substantial Improvement: Any reconstruction, rehabilitation, addition, or other improvement to a building, the cost of which equals or exceeds 50 percent of the market value of the building beforthe start of construction of the improvement. Substantial improvement includes buildings that have incurred “substantial damage," regardless of the actual repair work performed. The term does not, however, include either any project for improvement of a building to correct existing state or local code violations or any alteration to a “historic building," provided that the alteration will not preclude the building's continued designation as a “historic building."
  • Substantial Damage: Damage of any origin whereby the cost of restoring the building to its pre-damaged condition would equal or exceed 50 percent of the market value of the building beforthe damage occurred.

Market Value is generally a term used to define the value negotiated between and agreed to by a willing buyer and a willing seller. It can fluctuate up and down based on the economy, condition, use, or need, and has little relation to the true cost to rebuild a particular structure. Beyond the fact that market value has no fixed basis, two problems are created when market value is used to calculate substantial improvement: 1) Improvements do not have to be structural in nature to increase the market value by 50 percent. The owner may completely remodel and update the kitchen and bathrooms; this could easily increase market value by at least 50 percent; and 2) who knows what the market value was beforthe improvements were completed? Unless an analysis was completed by a licensed appraiser before improvements began, this is just a FEMA-induced guess.

CBRA Zones and Otherwise Protected Areas (OPAs)

Rapid development in coastal areas, on barrier islands, and near habitat-rich wetland areas prompted the Federal government to pass the Coastal Barrier Resources Act of 1982 (CBRA). This was a legislative effort to minimize loss to human life, eliminate wasteful Federal expenditures, and prevent damage to fish, wildlife, and natural resources in protected areas by discouraging further development. Coastal Barrier Resource System (CBRS) units (“System Units") were delineated by Congress, with help from agencies within the Department of the Interior, creating areas of land subject to “passive" Federal protection.

Congress expanded on the CBRS units with the adoption of the Coastal Barrier Improvement Act of 1990 (CBIA). This act added System Units not part of the original act and created additional zones known as “Otherwise Protected Areas" (OPAs).

Otherwise Protected Area (OPA) boundaries generally follow Federal, state, or local park boundaries and include land used for recreation or conservation. However, OPAs are not always restricted to these properties. Congress intentionally incorporated undeveloped land located contiguous to defined park land into OPAs. Individuals and private entities own some of this undeveloped land.

These two acts combine to remove 3.1 million acres of land million CBRS and 1.8 million OPAs) from eligibility for Federal flood protection through the NFIP.

Federal Funds in Protected Areas

Federal spending is strictly limited in CBRS units. Federal monies are available only to fund emergency assistance (not the same as disaster assistance), military activities necessary for national security, exploration for and removal of energy resources and the maintenance of existing Federal navigation channels. Individuals and entities within a CBRS unit cannot receive Federally-backed loans (i.e., VA, FHA, Fannie Mae or Freddie Mac loans) nor is Federal flood insurance available.

Only one restriction on Federal money applies in Otherwise Protected Areas, the ability to purchase Federal flood insurance. Structures located in an OPA cannot purchase flood coverage through the National Flood Insurance Program (NFIP).

A 2002 U.S. Fish and Wildlife Service study estimates that from 1983 through 2010 Federal fund restrictions mandated by these Acts will have resulted in $1.3 billion in savings to taxpayers. Restrictions on Federal spending for roads, wastewater systems, potable water supply, disaster relief, and flood insurance in these restricted areas combine to create this savings.

Grandfather Laws in CBRS and OPAs

Structures existing prior to the adoption of these Acts garner grandfather status and remain eligible for Federal flood coverage provided they were built or substantially improved on or before specified dates and have not suffered substantial damage. Grandfather status is granted:

  • To any structure in a CBRS unit created by the CBRA of 1982 built or substantially improved on or before October 1, 1983;
  • To any structure in a CBRS unit added by the CBIA of 1990 built or substantially improved on or before November 1, 1990; or
  • To any structure in an OPA built or substantially improved on or before November 16, 1991.

Grandfathered buildings suffering substantial damage, from any peril (fire, wind, or flood), or substantially improved after the above dates lose eligibility under the Grandfather Laws and no longer qualify for flood coverage through the NFIP. (Substantial damage and substantial improvement were defined above.)

Passive Federal Protection

Restrictions on the availability of Federal money for loans or Federal flood coverage in these protected areas do not preclude the use of “free market" loans or open market flood insurance. Further, these laws do not disallow building and development in these areas; they simply do not allow the use of Federal dollars to finance, insure, build roads to, or supply potable water to such development.

Owners are allowed to develop their property as they desire (subject to building codes and laws) but without any Federal money. The government did not take away property rights, just the availability of Federal funds, thus the term “Passive Federal Protection."

Determination of Coverage Eligibility

Only the U.S. Fish and Wildlife Service can officially determine if a property is located in a CBRS unit or an OPA. Although these zones are indicated on applicable Flood Insurance Rate Maps (FIRMs), boundary lines on older FIRMs are only approximations and can be off by as much as 100 yards (affecting as many as three houses). No local surveyor, building inspector, or other town official has the authority to make an official determination.

Standard flood insurance policies require that if any part of a structure is in a Special Flood Hazard Area (SFHA), the entire building must be rated in the higher risk zone as per the prior discussion. However, this rule does not necessarily apply in CBRS units or OPAs. If a building is dissected by a CBRS or OPA boundary line, provisions in the law may allow the property to remain eligible for Federal flood coverage. Decisions are made on a case-by-case basis depending on the specific details and history of the property in question.

Additions made to a structure after an eligibility ruling has been made can be problematic. Expansion on the seaward side of the dissecting boundary line could jeopardize the structure's continued eligibility. However, additions on the leeward side should not result in any coverage issues (provided there is no change in the reference level).

Locations of CBRA Zones and OPAs

Twenty-one states, Puerto Rico and the Virgin Islands are home to CBRS units or OPAs. States containing these units include: Alabama, Connecticut, Delaware, Florida, Georgia, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, New Jersey, New York, North Carolina Ohio, Rhode Island, South Carolina, Texas, Virginia, and Wisconsin.

US Fish & Wildlife provides an online tool for mapping/locating properties in a CBRA zone:

Key Questions

  • Is the structure located in an NFIP-participating community?
  • Is the structure Pre-FIRM or Post-FIRM?
  • In what flood zone is the structure located? Do flood zones
  • change near the structure (i.e., from “X" to “A")?
  • Is the dwelling located in a Special Flood Hazard Area?
  • Does the structure have a “basement" as defined in the
  • policy?
  • If located in a Zone “V": Is the structure elevated on piers, posts, pilings, etc.?
  • If located in a Zone “A": Do solid foundation perimeter walls have proper engineered openings (1 sq. inch per 1 sq. foot of enclosed space)?
  • Is the structure located in a CBRA zone or OPA?
  • When was the last elevation certificate completed?
  • What is the height above Base Flood Elevation (BFE)?
  • Have there been any additions to the structure since the last elevation certificate was completed?
  • When was the last photo provided?
  • Have there been any improvements or betterments to the structure (external additions, internal upgrades, etc.)? If “yes," what were the improvements and what was the cost of improvements?
  • Has the structure been damaged by any cause of loss (fire, wind, flood, etc.)?
  • Has the insured previously carried flood coverage on the structure? When?
  • Is coverage needed for a loan closing? (If not, explain waiting period.)
  • Has the community been remapped recently?


First published: August 11, 2021

Updated: June 6, 2024


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