Flood insurance on the Northern Neck

As was explained in Flooding risk on the Northern Neck, flooding is a risk to many on the Northern Neck. It negatively effects individuals, communities, businesses, infrastructure, and government. Thus it's no surprise that there were 1,940 flood insurance policies in force with a value of $558 million on the Northern Neck — Lancaster, Northumberland, Richmond, and Westmoreland counties — as of March 31, 2017. The premiums for these policies amounts to $1.6 million.

Northumberland County residents hold the most policies (737), followed by Lancaster County (600), Westmoreland county (520), and Richmond County (82). Additional information about these policies is shown in the image below; it is also in the Google spreadsheet Flood Insurance Policies in Place on the Northern Neck as of 3/31/17.

These policy numbers make sense given the property damage costs from flooding and coastal flooding from January 1, 1950 to April 30, 2017. The NOAA Storm Events Database reports:

• Lancaster County: A total of $1.87 million in property damage from five of 12 flooding events including a Nor'easter in November 2009, Tropical Cyclone Sandy in 2012, and Hurricane Joaquin in 2015.
• Northumberland County: A total of $20.43 million in property damage from four of 12 flooding events including Tropical Storm Ernesto in 2006, Tropical Cyclone Sandy in 2012, and a Nor'easter in November 2009.
• Richmond County: A total of $1.8 million in property damage from two of seven flooding events including Tropical Storm Ernesto in 2006 and Tropical Cyclone Sandy in 2012.
• Westmoreland County: A total of $220,000 in property damage from two of seven flooding events including Tropical Storm Ernesto in 2006 and Tropical Cyclone Sandy in 2012.

Between 1978 and March 31, 2017, payments for NFIP-insured losses amounted to just over $21 million. The image titled Flood Insurance Total Payments by #NNK Jurisdiction, 1978-March 31, 2017 shows the total payments made by the flood insurance program by Northern Neck jurisdiction. The underlying data, with additional information, is in the Google spreadsheet Flood Insurance Losses on the Northern Neck, 1978 through 3/31/17.

To provide a bit of context, 103,580 National Flood Insurance Program policies were in force in Virginia as of March 31, 2017. The total value of these policies is close to $27 billion. The premiums paid for these policies is approximately $78 million. (Policy Statistics in effect on report "AS OF" date below)

The National Flood Insurance Program

Acting on a "long history of property damage and loss of life due to flooding", the U.S. Congress created the National Flood Insurance Program (NFIP) in the National Flood Insurance Act of 1968. NFIP had two goals. First, "To provide flood insurance for structures and contents in communities that adopt and enforce an ordinance outlining minimal floodplain management standards." Second, "To identify areas of high and low flood hazard and establish flood insurance rates for structures inside each flood hazard area." (National Flood Insurance Act of 1968)

The Flood Disaster Protection Act of 1973 (P.L. 93-234) made the purchase of flood insurance mandatory for certain property owners and the National Flood Insurance Reform Act of 1994 (P.L. 103-325) made adjustments to that requirement. The stick associated with this requirement was via lenders. FEMA explains in Mortgage Lender Requiring Flood Insurance:

Why does my mortgage lender require me to buy flood insurance?

Under federal law, the purchase of flood insurance is mandatory for all federal or federally related financial assistance for the acquisition and/or construction of buildings in high-risk flood areas (Special Flood Hazard Areas or SFHAs).

The amount of flood insurance coverage required by the Flood Disaster Protection Act of 1973, as amended by the National Flood Insurance Reform Act of 1994, is the lesser of the following:

1. The maximum amount of NFIP coverage available for the particular property type,
2. The outstanding principal balance of the loan, or
3. The insurable value of the structure.

If the property is not in a high-risk area, but instead in a moderate-to-low risk area, federal law does not require flood insurance; however, a lender can still require it. In fact, nearly 1 in 4 NFIP flood claims occur in these moderate- to low-risk areas! Note that if during the life of the loan the maps are revised and the property is now in the high-risk area, your lender will notify you that you must purchase flood insurance.

The American Academy of Actuaries Flood Insurance Subcommittee found, however, "GAO studies of the mandatory purchase requirement found mixed levels of compliance, although compliance appears to have increased considerably since the passage of the 1994 act." (The National Flood Insurance Program: Past, Present...and Future? (PDF))

Because flood insurance is different from other types of insurance, FEMA's Three Important Facts About Your Flood Policy is a life saver.

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 it. 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 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 it. 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.

To learn more about the history of federal interest in flooding, read A Chronology of Major Events Affecting the National Flood Insurance Program (PDF).


This is the sixth in a series of posts about threats and risks, especially during hurricane season.

• Part 1, New series: Hurricanes, evacuation, data, and the Northern Neck
• Part 2, Virginia's got a new hurricane/other disaster evacuation plan
• Part 3, Hurricanes, tornadoes, and other extreme weather on the Northern Neck
• Part 4, #KnowYourZoneVA on the Northern Neck
• Part 5, Flooding risk on the Northern Neck