NJ Flood insurance summary of coverage’s

A floodplain, or flood plain, is flat or nearly flat land adjacent to a stream or river that experiences occasional or periodic flooding. It includes the floodway, which consists of the stream channel and adjacent areas that carry flood flows, and the flood fringe, which are areas covered by the flood, but which do not experience a strong current.

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Summary of Coverage

This document was prepared by the National Flood Insurance Program (NFIP) to help
you understand your flood insurance policy. It provides general information about
deductibles, what is and is not covered by flood insurance, and how items are valued at
time of loss.

This document is based on the Standard Flood Insurance Policy Dwelling Form, which is
used to insure one to four family residential buildings and single family dwelling units in
a condominium building. There are two other policy forms:

• The General Property Form is used to insure five or more family residential buildings
and non-residential buildings.

• The Residential Condominium Building Association Policy Form is
used to insure residential condominium association buildings.

While the three forms are similar in many ways, there are differences as well. For
example, the General Property Form does not provide coverage for contents in any
building other than the insured building, and the Residential Condominium Building
Association Policy Form contains a coinsurance clause, which provides for a pro rata
reduction in the building claim payment if the building is not insured to 80 percent of its
replacement value.

Two Types of Flood Insurance Coverage
The NFIP’s Dwelling Form offers coverage for: 1. Building Property, up to $250,000, and
2. Personal Property (Contents), up to $100,000. The NFIP encourages people to
purchase both types of coverage. Your mortgage company can require that you purchase
a certain amount of flood insurance coverage.

For information about your specific limits of coverage and deductibles, refer to the
Declarations Page in your flood insurance policy. It’s also a good idea to review
your policy with your insurance agent or company representative.

What is a Flood?
Flood insurance covers direct physical loss caused by “flood.” In simple terms, a flood is
an excess of water on land that is normally dry. Here’s the official definition used by the
National Flood Insurance Program.

A flood is “A general and temporary condition of partial or complete inundation of two
or more acres of normally dry land area or of two or more properties (at least one of
which is your property) from:

• Overflow of inland or tidal waters;

• Unusual and rapid accumulation or runoff of surface waters from any source;

• Mudflow*; or

• Collapse or subsidence of land 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.”

*Mudflow is defined as “A river of liquid and flowing mud on the surfaces of normally
dry land areas, as when earth is carried by a current of water…”

Three Important Facts About Your Flood Policy
A Standard Flood Insurance Policy is a single-peril (flood) policy that pays for direct
physical damage to your insured property up to the replacement cost or Actual Cash
Value (ACV) (See “How Flood Damages Are Valued”) of the actual damages or the
policy limit of liability, whichever is less.

1. Contents coverage must be purchased separately.

2. It is not a valued policy. A valued policy pays the limit of liability in the event of a
total loss. For example: Your home is totally destroyed by a fire and it costs $150,000 to
rebuild. If your homeowners insurance policy is a valued policy with a $200,000 limit of
liability on the building, you would receive $200,000. Flood insurance pays just the
replacement cost or ACV of actual damages, up to the policy limit.

3. It is not a guaranteed replacement cost policy. A guaranteed replacement cost policy
pays the cost to rebuild your home regardless of the limit of liability. For example: Your
home is totally destroyed by a fire and it costs $200,000 to rebuild. If your homeowners
insurance policy is a guaranteed replacement cost policy with a $150,000 limit of liability
on the building, you would receive $200,000. Flood insurance does not pay more than the
policy limit.

Choosing Deductibles

Choosing the amount of your deductibles is an important decision. As with car or
homeowners insurance, choosing a higher deductible will lower the premium you pay,
but will also reduce your claim payment.

You can normally choose different deductibles for Building Property and Personal
Property coverage. The deductibles will apply separately to Building Property and
Personal Property claims. Your mortgage company can require that your deductible is no
more than a certain amount.

Review the Declarations Page in your flood insurance policy for amounts of coverage
and deductibles. Talk with your insurance agent, company representative, or lender about
raising or lowering deductibles.

Reminder: Keep Your Receipts
While you are not expected to keep receipts for every household item and article of
clothing, do try to keep receipts for electronic equipment, wall-to-wall carpeting, major
appliances, and other higher cost items. Your adjuster will be able to process your claim
more quickly when you can prove how much items cost at the time of purchase.

What is Covered by Flood Insurance — and What’s Not
Generally, physical damage to your building or personal property “directly” caused by a
flood is covered by your flood insurance policy. For example, damages caused by a sewer
backup are covered if the backup is a direct result of flooding. However, if the backup is
caused by some other problem, the damages are not covered.

The following information provides general guidance on items covered and not covered
by flood insurance. Refer to your policy for the complete list.

General Guidance on Flood Insurance Coverage

What is insured under Building Property coverage
• The insured building and its foundation.
• The electrical and plumbing systems.
• Central air conditioning equipment, furnaces, and water heaters.
• Refrigerators, cooking stoves, and built-in appliances such as dishwashers.
• Permanently installed carpeting over an unfinished floor.
• Permanently installed paneling, wallboard, bookcases, and cabinets.
• Window blinds.
• Detached garages (up to 10 percent of Building Property coverage). Detached buildings
(other than garages) require a separate Building Property policy.
• Debris removal.

What is insured under Personal Property coverage
• Personal belongings such as clothing, furniture, and electronic equipment.
• Curtains.
• Portable and window air conditioners.
• Portable microwave ovens and portable dishwashers.
• Carpets not included in building coverage (see above).
• Clothes washers and dryers.
• Food freezers and the food in them.
• Certain valuable items such as original artwork and furs (up to $2,500).

What is not insured by either Building Property or Personal Property coverage
• Damage caused by moisture, mildew, or mold that could have been
avoided by the property owner.
• Currency, precious metals, and valuable papers such as stock certificates.
• Property and belongings outside of a building such as trees, plants, wells, septic
systems, walks, decks, patios, fences, seawalls, hot tubs, and swimming pools.
• Living expenses such as temporary housing.
• Financial losses caused by business
interruption or loss of use of insured property.
• Most self-propelled vehicles such as cars, including their parts (see Section IV.5 in your

General Guidance on Flood Insurance Coverage Limitations In Areas
Below the Lowest Elevated Floor and Basements
Flood insurance coverage is limited in areas below the lowest elevated floor (including
crawlspaces) depending on the flood zone and date of construction (refer to Part III,
Section A.8 in your policy) and in basements regardless of zone, or date of construction.
These areas include:

1. Basements. Coverage limitations apply to “basements,” which are any area of the
building, including a sunken room or sunken portion of a room, having its floor below
ground level on all sides.

2. Crawlspaces under an elevated building. When a building is elevated on foundation
walls, coverage limitations apply to the “crawlspace” below.

3. Enclosed areas beneath buildings elevated on full story foundation walls that are
sometimes referred to as “walkout basements.” Coverage limitations
apply to the enclosed areas (lower floor) even when a building is constructed with what is sometimes
called a “walkout basement.”

4. Enclosed areas under other types of elevated buildings. Coverage limitations apply
to “enclosed areas” at ground level under an “elevated building.” An elevated building
allows water to flow freely under the living quarters, thus putting less strain on the
building in the event of flooding. An “enclosure” is the area below the lowest elevated
floor that is fully shut in by rigid walls.

What is insured under Building Property coverage
• Foundation walls, anchorage systems, and staircases attached to the building.
• Central air conditioners.
• Cisterns and the water in them.
• Drywall for walls and ceilings (in basements only).
• Nonflammable insulation (in basements only).
• Electrical outlets, switches, and circuit breaker boxes.
• Fuel tanks and the fuel in them, solar energy equipment, well water tanks and pumps.
• Furnaces, hot water heaters, heat pumps, and sump pumps.

What is insured under Personal Property coverage
• Washers and dryers.
• Food freezers and the food in them (but not refrigerators).
• Portable and window air conditioners.

What is not insured by either Building Property or Personal Property coverage
• Paneling, bookcases, and window treatments such as curtains and blinds.
• Carpeting, area carpets, and other floor coverings such as tile.
• Drywall for walls and ceilings (below lowest elevated floor).
• Walls and ceilings not made of drywall.
• Most personal property such as clothing, electronic equipment, kitchen supplies, and

How Flood Damages Are Valued
The value of flood damage in the Dwelling Form is based on either Replacement Cost
Value (RCV) or Actual Cash Value (ACV).

Replacement Cost Value (RCV)
Replacement Cost Value (RCV) is the cost to replace that part of a building that is
damaged (without depreciation). To be eligible, three conditions must be met:
1. The building must be a single-family dwelling, and
2. Be your principal residence, meaning you live there at least 80 percent of the year, and
3. Your building coverage is at least 80 percent of the full replacement cost of the
building, or is the maximum available for the property under the NFIP.

Actual Cash Value (ACV)
Actual Cash Value (ACV) is Replacement Cost Value at the time of loss, less the value
of its physical depreciation.

Some building items such as carpeting are always adjusted on an ACV basis. For
example, wall-to-wall carpeting could lose between 10–14 percent of its value each year,
depending on the quality of the carpeting. This depreciation would be factored in the

Personal property is always valued at ACV.

Special Considerations for Multiple Claims
Property owners of “severe repetitive loss properties” may be eligible for a FEMA
mitigation grant for property improvements that reduce the likelihood of future flood
damages. Property owners who refuse the grant money could be required to pay increased
flood insurance premiums.

A property is defined as a “severe repetitive loss property” when it meets one of these
1. Four or more separate flood claim payments have been made and each claim payment
exceeds $5,000, or
2. At least two flood claim payments have been made and the cumulative
payments exceed the value of the property.

What is Increased Cost of Compliance (ICC) Coverage?
Most NFIP policies include ICC coverage, which applies when flood damages are severe.
ICC coverage provides up to $30,000 of the cost to elevate, demolish, or relocate your
home. If your community declares your home “substantially damaged” or “repetitively
damaged” by a flood, it will require you to bring your home up to current community

The total amount of your building claim and ICC claim cannot exceed the maximum limit
for Building Property coverage ($250,000 for a single-family home). Having an ICC
claim does not affect a Personal Property claim (up to $100,000),
which is paid separately.

Details about eligibility are in Part III, Section D of your policy.

A final note
This document provides general information about flood insurance coverage. However,
please be aware that your Standard Flood Insurance Policy, your application, and any
endorsements, including the Declarations Page, make up your official contract of
insurance. Any differences between this information and your policy will be resolved in
favor of your policy. If you have questions, call your insurance agent or company

Congress created the National Flood Insurance Program (NFIP) in 1968 to reduce
future flood damage through floodplain management, and to provide people with
flood insurance through individual agents and insurance companies. The Federal
Emergency Management Agency (FEMA) manages the NFIP. As required by
Congress, this document was prepared by the NFIP to help flood insurance
policyholders understand their policy.

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