About Flood Insurance | Elevation Certificates | Substantial Improvement/Damange | Resources

About Flood Insurance

Two federal statues under the NFIP mandate flood insurance: The Flood Disaster Protection Action of 1973 and The National Flood Insurance Reform Act of 1994. For communities that are part of the NFIP, federally-backed and private flood insurance is available to all property owners, not just those in the floodplain. Properties in the Special Flood Hazard Area (SFHA) that have a federally-backed mortgage are required to obtain flood insurance. Federal flood insurance is provided through the NFIP, while some private insurance companies offer write-your-own flood insurance policies. Flood Smart has the best information on flood insurance – who needs it, how to buy it, what it covers, etc.

In 2012, a federal bill was passed called the Biggert-Waters Flood Insurance Reform Act. This act increased flood insurance premium rates to reflect the true flooding risk of each property, rather than the previously subsidized rate. This was to make the National Flood Insurance Program more financially stable, since at the time the bill was passed, FEMA owed the US Treasury $20 billion (FAS). To slow the premium increases of the Biggert-Waters Act, President Obama signed the Homeowner Flood Insurance Affordability Act in 2014. This act required gradual flood insurance rate increases instead of immediate ones – premiums could not increase by more than 18% per year for a residential policyholder or by 25% for a business property owner.

Another way to slow the increased financial burden to residents is by grandfathering. This means any home built before the community’s first FIRM was released are known as pre-FIRM structures and therefore receive subsidized flood insurance premiums because they were built before the regulations were enacts. This does not mean these structures will never have to pay flood insurance though. Each year, premium rates are increasing for pre-FIRM structures to reflect the true risk. Other rules for pre-FIRM structures include:

  • When an updated FIRM is released for a community, pre-FIRM structures have 1 year to become compliant with any new standards or they will face higher premium rates.
  • If a pre-FIRM structure is damaged by more than 50% of the assessed value by any natural disaster (not just floods), they must be improved to meet current NFIP compliance standards (see section below on Substantial Damage).
  • Pre-FIRM property owners who continuously renew their flood insurance policies are able to keep the premium rate from the time at which the policy was purchased.

One way to reduce the cost of flood insurance premiums for a community is by joining the Community Rating System (CRS). This program rewards communities with sound floodplain management practices by reducing their residents’ insurance premiums. See our CRS page for more information.


Elevation Certificates

Flood insurance rates are determined based off of several factors but the elevation of a structure is one of the most important. Most property elevations are determined with the community’s Flood Insurance Rate Map (FIRM) and/or the Flood Insurance Study (FIS). These elevations are only estimations, though, to show the probability of a property’s flood risk. Elevation Certificates are the most accurate way to certify the elevation of structures on a property. These certificates are completed by a licensed surveyor for the insured structures. The property elevation is then compared to the base flood elevation (BFE) for the property to determine the risk of structures flooding. By providing the true risk of a property to flood, the insurance premium rate is often lowered because the elevation certificate proves the elevation to be higher than the FIRM shows.

For communities that are enrolled in the CRS, elevation certificates are required for all structures in the floodplain. Some communities have contracts with a surveyor to provide reduced costs for completing elevation certificates for a group of properties.


Substantial Improvement/Damage

Under the NFIP, any improvement on a habitable structure located in the floodplain that costs more than 50% of the market value of the structure must meet current elevation and ordinance requirements. This includes renovations/improvements, as well as repairs after a disaster. The market value can be attained from the local assessor’s office. After a flood, structures should be appraised by a community official (building code officer, appraiser, etc.) as soon as possible, to assess the true damage from the disaster. Every property owner should receive a letter if they are allowed to begin repairs or if they are substantially damaged.

Substantial Improvement: Cost to rebuild/improve a structure in the floodplain, whether damaged or not = more than 50% of market value prior to work start.

Substantial Damage: Cost of post-damage repair = more than 50% of pre-damage market value

Definitions from FEMA

Note: this only applies to structures in the Special Flood Hazard Area (SFHA).
Note: substantial damage is damage from any cause, not just floods.

Find more information from FEMA Publication 213: Answers to Questions About Substantially Damaged Buildings.
For information on funding for mitigation, see our Funding Resources page.


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