Flood Facts for Community Associations

January 1, 2017

The information below should be considered as you form your community association flood plans.

Important Websites 

Important Definitions

  • NFIP – National Flood Insurance Program
  • RCBAP – Residential Condominium Building Association Policy
  • E & S Market – Excess and Surplus Lines  Insurance Market
  • FEMA – Federal Emergency Management Agency
  • SFHA – Special Flood Hazard Area
  • Flood – The NFIP defines flood as 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 from the overflow of inland or tidal waters or from the unusual and rapid accumulation or runoff of surface waters from any source. (Private carriers may define flood differently.)

What are community associations' options for obtaining flood coverage?
There are four different ways communities can obtain flood coverage:

  • RCBAP – Residential Condominium Building Association Policy through NFIP (National Flood Insurance Program), purchased in the name of the association.
  • Dwelling Form Flood Policy through NFIP, purchased by the individual unit owner.
  • Removal of the exclusion for the peril of flood on the association’s package policy. Carriers, however, usually only allow a small sublimit for this coverage.
  • Excess and Surplus Flood Coverage (excess over the NFIP policy) can be purchased at the association level, but only by the entity/owner who purchased the primary coverage.  

What is the maximum limit allowable for purchase through the NFIP program?
The maximum allowable limit of coverage per unit in an association is $250,000, regardless of the replacement value of the individual unit. On the dwelling form, the maximum contents limit available is $100,000.

Is there a way to purchase additional building or contents coverage?
The additional (excess) coverage may be purchased through the Excess and Surplus Lines market. However, when the association has the RCBAP in place, only they may purchase the excess for the building property. The homeowner may purchase excess limits for contents. 

Can an individual homeowner obtain a dwelling form policy from NFIP if a RCBAP is in place?
Yes. However, the total amount of coverage available per unit from either the RCBAP or the Dwelling Form, or a combination of the two, is $250,000. Therefore, if an RCBAP is in place with the maximum $250,000 limit per unit, the individual homeowner should use the Dwelling Form to purchase contents and loss assessment coverage, but there is no advantage to purchasing additional structural coverage.

Which NFIP policy is primary if there is both an RCBAP and a dwelling form policy in place?
The RCBAP is primary and the Dwelling Form is excess, but only up to the $250K limit allowable on the property section.

Do the governing documents for the association come into play as to the level of coverage offered by the NFIP policy?
The NFIP does not recognize the governing documents and will settle all losses on an “All In” basis. This means that everything physically attached to the building is covered on the FEMA policy unless it is specifically mentioned as excluded or is absent in the list of covered items on their policy form.

If a homeowner purchases a dwelling from policy and the association subsequently purchases the full allowed limit of $250K per unit on the RCBAP, can the homeowner decrease structural limits on their policy?
Yes, but there is some paperwork involved. The individual would need to supply a replacement cost estimate for the unit, the declaration page of the RCBAP, and documentation of the limits. Other items may be requested as well.

When would coverage begin on a dwelling form or an RCBAP policy?
Thirty days after NFIP receives the signed application and payment of the full premium for the annual policy. NFIP will send a declarations page after processing. This will reflect the effective date. There is an exception to the waiting period if the coverage is a lender requirement for closing.  

Can loss assessment coverage be purchased on the RCBAP?
No. This is only available on an individual flood policy.

Is the NFIP coverage listed as "extended replacement cost" or "gauranteed replacement cost" like we on our present master policy?
No. Payment after a loss will not exceed the policy limit and it could have co-insurance penalties if the limits are not sufficient. (The RCBAP must be purchased at a limit of $250K per unit or 80% of the replacement cost value, whichever is less, to avoid a co-insurance penalty.)

Are personal vehicles left in the garage covered on the RCBAP policy?
No. This coverage would need to be addressed with your personal insurance agent who handles the auto coverage.

Flood insurance is required by Federal legislation in Special Flood Hazard Areas (SFHAs) A, A1-A30, AE, AO, AH, AR, A99 and V zones.

In non SFHAs, flood insurance is optional (B, C, and X). However, it is important to note that one-fourth of all claims are paid in these zones.