Flood Insurance

Introduction

The Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a) requires that projects receiving federal assistance and located in an area identified by the Federal Emergency Management Agency (FEMA) as being within a Special Flood Hazard Areas (SFHA) be covered by flood insurance under the National Flood Insurance Program (NFIP). In order to be able to purchase flood insurance, the community must be participating in the NFIP. If the community is not participating in the NFIP, federal assistance cannot be used in those areas.

HUD Guidance

Does this project involve mortgage insurance, refinance, acquisition, repairs, rehabilitation, or construction of a structure, mobile home, or insurable personal property?

If so, is the project excepted from flood insurance? There are four statutory exceptions:

1. Formula grants made to states
2. Self-insured state-owned property within states approved by the Federal Insurance Administrator consistent with 44 CFR 75.11
3. Small loans ($5,000 or less)
4. Assisted leasing that is not used for repairs, improvements, or acquisition

In addition, it is HUD policy that flood insurance is not required for a federal project consisting of minor repairs if all aggregated repairs cost less than the National Flood Insurance Program’s maximum deductible of $10,000.

If not, is the structure, part of the structure, or insurable property located in a FEMA-designated Special Flood Hazard Area? Use FEMA’s Map Service Center to make the determination.

If so, the community participating in the National Flood Insurance Program or has less than one year passed since FEMA notification of Special Flood Hazards? For loans, loan insurance or guarantees, the amount of flood insurance coverage must at least equal the outstanding principal balance of the loan or the maximum limit of coverage made available under the National Flood Insurance Program, whichever is less. 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. The amount of coverage must at least equal the total project cost or the maximum coverage limit of the National Flood Insurance Program, whichever is less. If the community is not participating, or if its participation has been suspended, federal assistance may not be used for projects in the Special Flood Hazard Area.

Compliance and Documentation

The environmental review record should contain one of the following:

• Documentation supporting the determination that the project does not require flood insurance or is excepted from flood insurance
• A FEMA Flood Insurance Rate Map (FIRM) showing that the project is not located in a Special Flood Hazard Area
• A FEMA Flood Insurance Rate Map (FIRM) showing that the project is located in a Special Flood Hazard Area along with a copy of the flood insurance policy declaration or a paid receipt for the current annual flood insurance premium and a copy of the application for flood insurance in the review

View Flood Insurance - Worksheet.

View Flood Insurance - Partner Worksheet.