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Did You Know?
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HUD
Environment Q & A
Answers to frequently asked questions on
Flood
Insurance |
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Is
the property within an area requiring flood insurance protection?
Threshold: The Flood Disaster Protection Act of 1973, as
amended, requires that property owners purchase flood insurance
for buildings located within Special Flood Hazard Areas (SFHA),
when Federal financial assistance is used to acquire, repair, improve,
or construct a building.
Duration of Flood Insurance Coverage. The statutory period
for flood insurance coverage may extend beyond project completion.
For loans, loan insurance or loan guarantees, flood insurance coverage
must be continued for the term of the loan. For grants and other
non-loan forms of financial assistance, flood insurance coverage
must be continued for the life of the building irrespective of the
transfer of ownership.
Dollar Amount of Flood Insurance Coverage. For loans, loan insurance
or guarantees, the amount of flood insurance coverage need not exceed
the outstanding principal balance of the loan. For grants and other
non-loan forms of financial assistance, the amount of flood insurance
coverage must be at least equal to the maximum limit of coverage
made available by the Act with respect to the particular type of
building involved (i.e., Single Family, Other Residential, Non-Residential,
or Small Business), or the development or project cost, whichever
is less. The development or project cost is the total cost for acquiring,
constructing, repairing or improving the building. This cost covers
both the Federally-assisted and the non-Federally assisted portion
of the cost, including any machinery, equipment, fixtures, and furnishings.
If the Federal assistance includes any portion of the cost of any
machinery, equipment, fixtures, or furnishings, the total cost of
that item must also be covered by flood insurance.
Proof of Purchase of Flood Insurance Protection. Once HUD has
approved a specific SFHA property, the grantee's file for any SFHA
property shall contain "proof of purchase" of flood insurance protection.
The standard documentation for compliance is the Policy Declarations
form issued by the National Flood Insurance Program (NFIP) or by
any property insurance company offering coverage under NFIP. The
insured should have its insurer automatically forward to the grantee,
in the same manner as to the insured, an information copy of the
Policy Declarations form, which is used to verify compliance. [http://www.fema.gov/about/programs/nfip/index.shtm]
Documentation: Grantees are to estimate the amount and period
of flood insurance coverage that is to be made a condition of approval
of the SFHA building: Estimate coverage amount of flood insurance
$__________ Indicate coverage period: Year in which flood insurance
policy is to start: ________ Year in which flood insurance policy
is to end: _________
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