The congress started the National Flood Insurance Program (NFIP) in 1968 through the National Flood Insurance Act of the same year.
Under the provisions of the Act property owners of the participating communities of Special Flood Hazard Areas (SFHA) can buy flood insurance cover to meet the rising cost of restoring flood damaged buildings. For enrolment and participation in the NFIP the concerned local community must agree to adopt and implement floodplain management ordinance in order to reduce future flood related risks to new constructions in SFHA.
Floodplain management is a community program of preventive and corrective steps to reduce flood damage. The measures include flood loss reducing building standards for new development. Some communities have voluntarily extended such flood loss reducing building norms even for existing structures.
NFIP also identifies and maps nation’s flood prone areas. This mapping provides valuable inputs needed for floodplain management program. Mapping results also assist in fixing flood insurance premium rates for different constructions.
The NFIP was designed to be a self supporting arrangement whose operating expenses and flood insurance claims was intended to be paid out of the collection of flood insurance premium. However, cost to the federal exchequer was $200 million annually to fund the losses of the NFIP.
This federally backed flood insurance is available to homeowners and renters in the participating communities. Flood insurance is meant to provide an alternative to disaster assistance for repairing flood affected structures. Flood insurance claims are subject to caps and ceilings.
