Flood Insurance Basics – Defining the Terms You Need to Know
Flood insurance terminology isn’t always the easiest to underst and. But knowing what’s covered and how your policy protects your family and your home is key to ensuring that you have the coverage you need, when you need it the most. That’s why the team at Wright Flood has put together this Flood Insurance Basics glossary, full of all the flood insurance terms* we think you’ll need to underst and your flood insurance policy and coverage.
We don’t ever want you to be confused by what’s in your policy, so if you have any questions, or if you want to find out how to secure coverage for your home or business, contact your local Wright Flood agent.
Actual Cash Value (ACV): The cost to replace an insured item of property at the time of loss, less the value of physical depreciation.
Base Flood: A flood having a 1% chance of being equaled or exceeded in any given year.
Base Flood Elevation (BFE): The elevation of surface water resulting from a flood that has a 1% chance of equaling or exceeding that level in any given year. The BFE is shown on the Flood Insurance Rate Map (FIRM) for zones AE, AH, A1–A30, AR, AR/A, AR/AE, AR/A1– A30, AR/AH, AR/AO, V1–V30 and VE.
Basement: Any area of the building, including any sunken room or sunken portion of a room, having its floor below ground level (subgrade) on all sides.
- A structure with 2 or more outside rigid walls and a fully secured roof, that is affixed to a permanent site; or
- A manufactured home (a “manufactured home,” also known as a mobile home, is a structure built on a permanent chassis, transported to its site in 1 or more sections, and affixed to a permanent foundation); or
- A travel trailer without wheels, built on a chassis and affixed to a permanent foundation, that is regulated under the community’s floodplain management and building ordinances or laws.
Business Building: A building in which the named insured is a commercial enterprise primarily carried out to generate income and the coverage is for:
- A building designed as a non-habitational building;
- A mixed-use building in which the total floor area devoted to residential uses is:
- 50% or less of the total floor area within the building if the residential building is a single family property; or
- 75% or less of the total floor area within the building for all other residential properties; or
- A building designed for use as office or retail space, wholesale space, hospitality space, or for similar uses.
Condominium Association: The entity made up of the unit owners responsible for the maintenance and operation of the following:
- Common elements owned in undivided shares by unit owners;
- Other real property in which the unit owners have use rights;
- Where membership in the entity is a required condition of unit ownership.
Contents: See Personal Property
Crawlspace: An under-floor space that has its interior floor area (finished or not) no more than 5 feet below the top of the next-higher floor. Crawlspaces generally have solid foundation walls. See Diagram 8 in the Elevation Certificate Instructions.
Date of Construction: The date that the building permit was issued, provided the actual start of construction, repair, reconstruction or improvement was within 180 days of the permit date.
Declarations Page: A computer-generated summary of information provided by the prospective policyholder in the application for flood insurance. The declarations page also describes the term of the policy and the limits of coverage and displays the premium and the insurer’s name. The declarations page is a part of the flood insurance policy.
Deductible: The fixed amount of an insured loss that is the responsibility of the insured and that is incurred before any amounts are paid for the insured loss under the insurance policy.
Direct Physical Loss By or From Flood: Loss or damage to insured property, directly caused by a flood. There must be evidence of physical changes to the property.
Dwelling: A building designed for use as a residence for no more than 4 families or a single-family unit in building under a condominium form of ownership.
Elevated Building: A building that has no basement and that has its lowest elevated floor raised above ground level by foundation walls, shear walls, posts, piers, pilings, or columns. Solid (perimeter) foundations walls are not an acceptable means of elevating buildings in V and VE zones.
Enclosure: That portion of an elevated building below the lowest elevated floor that is either partially or fully shut in by rigid walls.Erosion. The collapse, undermining or subsidence of l and along the shore of a lake or other body of water. Erosion is a covered peril if it is caused by waves or currents of water exceeding their cyclical levels which result in flooding.
Erosion: The collapse, undermining or subsidence of l and along the shore of a lake or other body of water. Erosion is a covered peril if it is caused by waves or currents of water exceeding their cyclical levels which result in flooding.
Federal Policy Fee. A flat charge that the policyholder must pay on each new or renewal policy to defray certain administrative expenses incurred in carrying out the NFIP.
Finished (Habitable) Area. An enclosed area having more than 20 linear feet of finished interior walls (paneling, etc.) or used for any purpose other than solely for parking of vehicles, building access or storage.
Flood: A general and temporary condition of partial or complete inundation of 2 or more acres of normally dry l and area or of 2 or more properties (at least 1 of which is the policyholder’s property) from:
- Overflow of inl and or tidal waters; or
- Unusual and rapid accumulation or runoff of surface waters from any source; or
- Mudflow; or
- Collapse or subsidence of l and along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above.
Flood In Progress: A flood that is in progress on the earlier of either:
- The date the community in which the insured property is located first experiences a flood as defined in this policy; or
- The date and time of an event initiating a flood that directly or indirectly affects areas downstream or in a floodway and ultimately results in the damage to the insured property. Events that may initiate such a flooding event include, but are not limited to, the following:
- Apillway is opened;
- A levee is breached;
- Water is released from a dam; and
- Water escapes from the banks of a waterway (stream, river, creek, etc).
- The applicability of this exclusion will be evaluated upon the assertion by a policyholder of the right to be paid for a loss under this policy.
Flood Insurance Rate Map (FIRM): Official map of a community on which FEMA has delineated the Special Flood Hazard Areas (SFHAs), the Base Flood Elevations (BFEs) and the risk premium zones applicable to the community.
Floodproofing: Any combination of structural and nonstructural additions, changes or adjustments to structures, which reduce or eliminate risk of flood damage to real estate or improved real property, water and sanitation facilities or structures with their contents.
Foundation Walls: Masonry walls, poured concrete walls or precast concrete walls, regardless of height, that extend above grade and support the weight of a building.
Freeboard: An additional amount of height above the Base Flood Elevation used as a factor of safety (e.g., 2 feet above the Base Flood) in determining the level at which a structure’s lowest floor must be elevated or floodproofed to be in accordance with state or community floodplain management regulations.
Full-Risk Premium Rate: A rate charged to a group of policies that results in aggregate premiums sufficient to pay anticipated losses and expenses for that group.
Gr andfathering: An exemption based on circumstances previously existing.
- Under NFIP statutory gr andfathering, buildings located in Emergency Program communities and Pre-FIRM buildings in the Regular Program are eligible for subsidized flood insurance rates.
- Under NFIP administrative gr andfathering, Post-FIRM buildings in the Regular Program built in compliance with the floodplain management regulations in effect at the start of construction will continue to have favorable rate treatment even though higher Base Flood Elevations (BFEs) or more restrictive, greater risk zone designations result from Flood Insurance Rate Map (FIRM) revisions. Policyholders who have remained loyal customers of the NFIP by maintaining continuous coverage (since coverage was first obtained on the building) are also eligible for administrative gr andfathering.
HFIAA Surcharge: The statutory surcharge imposed by Section 1308 of the Act.
High-Rise Building: High-rise condominium buildings have 5 or more units and at least 3 floors excluding enclosure even if it is the lowest floor for rating purposes. An enclosure below an elevated building, even if it is the lowest floor for rating purposes, cannot be counted as a floor to avoid classifying the building as low rise. Under the NFIP, townhouses/rowhouses are not considered high-rise buildings, regardless of the number of floors.
Historic Building: Any building that is:
- Listed individually in the National Register of Historic places (a listing maintained by the Department of the Interior) or preliminarily determined by the Secretary of the Interior as meeting the requirements for individual listing on the National Register; or
- Certified or preliminarily determined by the Secretary of the Interior as contributing to the historical significance of a registered historic district or a district preliminarily determined by the Secretary of the Interior to qualify as a registered historic district; or
- Individually listed in a state inventory of historic places in states with preservation programs that have been approved by the Secretary of the Interior; or
- Individually listed on a local inventory of historic places in communities with historic preservation programs that have been certified either:
- By an approved state program as determined by the Secretary of the Interior; or
- Directly by the Secretary of the Interior in states without approved programs.\
Increased Cost of Compliance: Coverage for expenses that a property owner must incur, above and beyond the cost to repair the physical damage the structure actually sustained from a flooding event, to comply with mitigation requirements of state or local floodplain management ordinances or laws. Acceptable mitigation measures are elevation, floodproofing, relocation, demolition or any combination thereof.
Letter of Determination Review (LODR): FEMA’s ruling on the determination made by a lender or third party that a borrower’s building is in a Special Flood Hazard Area (SFHA). A LODR deals only with the location of a building relative to the SFHA boundary shown on the Flood Insurance Rate Map (FIRM).
Letter of Map Amendment (LOMA): An amendment to the currently effective FEMA map which establishes that a property is not located in a Special Flood Hazard Area (SFHA). A LOMA is issued only by FEMA.
Letter of Map Revision (LOMR): An official amendment to the currently effective FEMA map. It is issued by FEMA and changes flood zones, delineations and elevations.
Lowest Adjacent Grade: The lowest point of the ground level immediately next to a building.
Lowest Floor: The lowest floor of the lowest enclosed area (including a basement). An unfinished or flood-resistant enclosure, usable solely for parking of vehicles, building access or storage in an area other than a basement area, is not considered a building’s lowest floor provided that such enclosure is not built so as to render the structure in violation of requirements.
Lowest Floor Elevation (LFE): The measured distance of a building’s lowest floor above the National Geodetic Vertical Datum (NGVD) or other datum specified on the FIRM for that location.
Low-Rise Building: Low-rise condominium buildings having fewer than 5 units regardless of the number of floors or 5 or more units with fewer than 3 floors including basement. All townhouses/rowhouses, regardless of the number of floors or units and all single-family detached condominium buildings are classified as low rise. An enclosure below an elevated building, even if it is the lowest floor for rating purposes, cannot be counted as a floor to avoid classifying the building as a low rise.
M andatory Purchase: Under the provisions of the Flood Disaster Protection Act of 1973, individuals, businesses and others buying, building or improving property located in identified areas of special flood hazards within participating communities are required to purchase flood insurance as a prerequisite for receiving any type of direct or indirect federal financial assistance (e.g., any loan, grant, guaranty, insurance, payment, subsidy or disaster assistance) when the building or personal property is the subject of or security for such assistance.
Misrating: The premium charged is incorrect because one or more of the rating characteristics used to determine the applicable premium rate for an application or renewal is discovered to be incorrect or was previously correct, but has changed.
National Flood Insurance Program (NFIP): The program of flood insurance coverage and floodplain management administered under the Act and applicable federal regulations promulgated in Title 44 of the Code of Federal Regulations, Subchapter B.
Newly Mapped (A Property Newly Mapped into the SFHA): A property that was once designated outside of the Special Flood Hazard Area (SFHA) on an effective Flood Insurance Rate Map (FIRM), and following a map revision, is designated within the SFHA. Property newly mapped into the SFHA by a map revision on or after April 1, 2015, and meeting certain loss history requirements is eligible for the Newly Mapped rating procedure outlined in the Newly Mapped section of this manual if coverage is purchased within 1 year of the map revision and continuously maintained. A property meeting the loss history requirements and newly mapped into the SFHA by a map revision effective on or after October 1, 2008, and before April 1, 2015, may be insured under the Newly Mapped rating procedure if coverage is purchased on or after April 1, 2015, but before April 1, 2016, and maintained continuously. The newly mapped procedure is not available for any property mapped into the SFHA by the initial FIRM.
Non-Primary Residence: A residential building that is not the primary residence of the policyholder.
Non-Primary Residential Property: Either a non-primary residence or the contents within a non-primary residence, or both.
Non-Residential Building: A commercial or mixed-use building where the primary use is commercial or non-habitational.
Non-Residential Property: Either a non-residential building, the contents within a non-residential building, or both.
Other Non-Residential Building. This is a subcategory of nonresidential buildings; a non-habitational building that does not qualify as a business building or residential building.
Other Residential Building. A residential building that is designed for use as a residential space for 5 or more families or a mixed-use building in which the total floor area devoted to non-residential uses is less than 25% of the total floor area within the building.
Other Residential Property. Either another-residential building, the contents within another residential building, or both.
Participating Community: A community for which FEMA has authorized the sale of flood insurance under the NFIP.
Policy: The entire written contract between the insured and the insurer. It includes the following:
- The printed policy form;
- The Application and declarations page;
- Any endorsement(s) that may be issued; and
- Any renewal certificate indicating that coverage has been instituted for a new policy and new policy term.
- NOTE: Only 1 dwelling, specifically described by the prospective policyholder in the Application, may be insured under a policy.
Personal property: single interest or dual interest credit insurance (where collateral is not a motor vehicle, mobile home, or real estate) that covers perils to goods purchased or used as collateral and that concerns a creditor’s interest in the purchased goods or pledged collateral either in whole or in part; or covers perils to goods purchased in connection with an open-end credit transaction.
Post-FIRM Building: A building for which construction or substantial improvement occurred after December 31, 1974 or on or after the effective date of an initial Flood Insurance Rate Map (FIRM), whichever is later.
Pre-FIRM Building: A building for which construction or substantial improvement occurred on or before December 31, 1974 or before the effective date of an initial Flood Insurance Rate Map (FIRM).
Preferred Risk Policy (PRP): A lower-cost St andard Flood Insurance Policy (SFIP) written under the Dwelling Form or General Property Form. It offers fixed combinations of building/contents coverage limits or contents-only coverage. The PRP is available for property located in B, C and X Zones in Regular Program communities that meets eligibility requirements based on the property’s flood loss history. It is also available for buildings that are eligible under the PRP Eligibility Extension.
Repetitive Loss Structure. An NFIP-insured structure that has had at least 2 paid flood losses of more than $1,000 each in any 10-year period since 1978.
Replacement Cost Value (RCV). The cost to replace property with the same kind of material and construction without deduction for depreciation.
Reserve Fund Assessment. An amount dedicated to the NFIP Reserve Fund as authorized by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW12).
Residential Building. A non-commercial building designed for habitation by one or more families or a mixed-use building that qualifies as a single-family, 2 – 4 family, or other residential building.
Residential Condominium Building. A building, owned and administered as a condominium, containing 1 or more family units and in which at least 75 percent of the floor area is residential.
Residential Condominium Building Association Policy (RCBAP). See “St andard Flood Insurance Policy (SFIP)-Residential Condominium Building Association Policy (RCBAP).”
Residential Property. Either a residential building or the contents within a residential building, or both.
Severe Repetitive Loss Building: Any building that:
- Is covered under a St andard Flood Insurance Policy made available under this title;
- Has incurred flood damage for which:
- 4 or more separate claim payments have been made under a St andard Flood Insurance Policy issued pursuant to this title, with the amount of each such claim exceeding $5,000, and with the cumulative amount of such claims payments exceeding $20,000; or
- At least 2 separate claims payments have been made under a St andard Flood Insurance Policy, with the cumulative amount of such claim payments exceed the fair market value of the insured building on the day before each loss.
Special Flood Hazard Area (SFHA): An area having special flood, mudflow or flood-related erosion hazards and shown on a Flood Hazard Boundary Map (FHBM) or a Flood Insurance Rate Map (FIRM) Zone A, AO, A1-A30, AE, A99, AH, AR, AR/A, AR/AE, AR/AH, AR/AO, AR/A1-A30, V1-V30, VE or V. For the purpose of determining Community Rating System (CRS) premium discounts, all AR and A99 zones are treated as non-SFHAs.
St andard Flood Insurance Policy (SFIP): Comprised of:
- Dwelling Form: The policy form used to insure a building designed for use as a residence for no more than 4 families or a single-family unit in a residential building under a condominium form of ownership. This form is also used to insure residential contents in any building. The owner of a residential building with 5 or more units can use this form to insure contents only in his or her own residential unit.
- General Property Form: The policy form used to insure a non-residential building or a 5-or-more-unit residential building not eligible for the Residential Condominium Building Association Policy (RCBAP). This form is also used to insure non-residential contents in any building or a building owner’s residential contents located in multiple units within a building with 5 or more units.
- Residential Condominium Building Association Policy (RCBAP): The policy form used to insure a building, owned and administered as a condominium, containing 1 or more units and in which at least 75% of the floor area is residential. The building must be located in a Regular Program community.
Subgrade Crawlspace. A crawlspace foundation where the subgrade under-floor area is no more than 5 feet below the top of the next-higher floor and no more than 2 feet below the lowest adjacent grade on all sides.
Submit-for-Rate (SFR). An application for flood insurance on a building for which no risk rate is published in the NFIP Flood Insurance Manual. Insurance coverage can be obtained only after the insurer has approved the application and has established the risk premium rate.
Subsidized Premium Rate. A rate charged to a group of policies that results in aggregate premiums insufficient to pay anticipated losses and expenses for that group
Substantially Damaged Building.A building that has incurred damage of any origin whereby the cost of restoring the building to its before damaged condition would equal or exceed 50% of the market value of the building before the damage occurred.
Substantially Improved Building.A building that has undergone reconstruction, rehabilitation, addition, or other improvement, the cost of which equals or exceeds 50% of the market value of the building before the “start of construction” of the improvement. This term does not include a building that has undergone reconstruction, rehabilitation, addition, or other improvement related to:
- Any project or improvement of a building to correct existing violations of a state or local health, sanitary, or safety code specifications that have been identified by the local code enforcement official and which are the minimum necessary to assure safe living conditions; or
- Any alteration of a “historic building”, provided that the alteration will not preclude the structure’s continued designation as a “historic building.”
2 – 4 Family Building: A residential building, including an apartment building, containing two to four residential spaces and in which commercial uses are limited to less than 25% of the building’s total floor area.
Unfinished Area. An enclosed area that is used only for the parking of vehicles, building access or storage purposes and that does not meet the definition of a finished (habitable) area. Drywall used for fire protection is permitted in unfinished areas.
Unit: A unit owned by the policyholder in a condominium building.
Variance: A grant of relief by a participating community from the terms of its floodplain management regulations.
Waiting Period: The time between the date of application and the policy effective date.
Walled and Roofed: A building that has 2 or more exterior rigid walls and a fully secured roof and that is affixed to a permanent site.
Write Your Own (WYO) Program: A cooperative undertaking of the insurance industry and FEMA begun in October 1983. The Write Your Own (WYO) Program operates within the context of the NFIP and involves private insurance carriers who issue and service NFIP policies.
Zone: A geographical area shown on a Flood Hazard Boundary Map (FHBM) or a Flood Insurance Rate Map (FIRM) that reflects the severity or type of flooding in the area.
Now is the time to call your local agent for a quote for flood insurance, or review your existing policy to ensure you have the coverage you need. To find a Wright Flood local agent call 866-373-5663.