National Flood Insurance Program

Example

“When Hurricane Harvey flooded Maria's Houston home, she was grateful she had purchased NFIP coverage since her regular homeowner's policy excluded flood damage entirely.”

Memory Tip

Think 'NFIP = No Flood? Insurance Please!' - it's the federal program that provides flood coverage when private insurance won't.

Why It Matters

NFIP is often the only source of flood insurance for homeowners, as most private policies exclude flood damage. With flooding being the most common natural disaster in the U.S., NFIP protection can mean the difference between financial recovery and financial ruin after a flood.

Common Misconception

Many homeowners believe their regular homeowner's insurance covers flood damage, or that they don't need flood insurance if they don't live in a high-risk flood zone. In reality, standard homeowner's policies exclude floods, and about 25% of NFIP claims come from properties outside high-risk flood zones.

In Practice

Tom owns a $250,000 home in a moderate flood risk area and pays $450 annually for NFIP coverage with $250,000 building coverage and $100,000 contents coverage. When a nearby river overflows causing $75,000 in damage to his home and $25,000 in personal property loss, NFIP pays the full $100,000 after his $1,000 deductible. Without NFIP, Tom would have faced the entire $100,000 cost since his homeowner's policy excludes flood damage.

Etymology

Created by Congress in 1968 following Hurricane Betsy, the program was established because private insurers withdrew from flood insurance markets after suffering massive losses, leaving property owners without affordable flood protection.

Common Misspellings

Related Terms

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