The National Flood Insurance Program and New Jersey

FLOOD RISK IN NEW JERSEYNew Jersey residents and visitors enjoy the amenities that come with its more than 1,800 miles of coastline, as well as interior rivers and other waterways. While supporting recreation, tourism, and many sectors of the economy, these waterways and coasts also introduce flood risk. New Jersey can experience coastal tidal flooding, storm water flooding, riverine flooding, and storm surge. Coastal flooding can be particularly damaging. The coastal zone covers 3,218 square miles and is home to 239 diverse communities. New Jersey is also incredibly dense in its urban areas, with 53 percent of the state’s total population residing in the coastal zone along the shore and rivers, putting their homes and businesses at risk of flooding.1,2

AN OVERVIEW OF THE NATIONAL FLOOD INSURANCE PROGRAMFlood insurance can protect residents financially from the risk of property damage from floods. While flood damage is typically not covered by standard homeowners policies, flood coverage is available through the federal National Flood Insurance Program (NFIP).3 The NFIP, founded in 1968, is housed within the Federal Emergency Management Agency (FEMA) and is a voluntary partnership between the federal government and local communities. As of August 2019, 553 of New Jersey’s 565 municipalities participate in the NFIP.4

When communities join the NFIP, they must implement certain floodplain management regulations for new construction within the FEMA-mapped 100-year floodplain, the area with a 1% annual chance of flooding, also referred to as the Special Flood Hazard Area (SFHA).5 This area is shown on FEMA Flood Insurance Rate Maps (FIRMs). These maps divide the SFHA and the area beyond it into different flood zones. The A zones are the SFHA subject to flooding from rivers or streams or shallow flooding areas. V zones are narrow strips along the coast that are in the SFHA and also subject to storm waves.

Once a community joins the NFIP, all properties can be insured through the program, including residences, commercial structures, and municipal buildings. A residential property owner can purchase up to $250,000 of coverage for their building and up to $100,000 of coverage for its contents. Renters can purchase a contents-only policy. Non-residential property owners, such as commercial and municipal properties, can purchase up to $500,000 of coverage each for the structure and its contents. When a flood occurs, the policyholder will be reimbursed for damage up to the coverage limit they choose.

Early in the history of the NFIP, Congress responded to low take-up rates for flood insurance with the mandatory purchase requirement: federally regulated lenders or issuers of federally-backed mortgages must require flood insurance on all loans secured by property in the SFHA. This helped increase the number of flood insurance policies purchased, but flood risk persists outside the SFHA. Despite this, few people insure when not mandated to do so. This is due to a combination of poor understanding about the risk, lack of understanding about the role of flood insurance in recovery, as well as beliefs that flood insurance is too expensive, and/or budget constraints. Research indicates that premiums are often cost prohibitive for low income households. There are ongoing efforts to make changes to the NFIP program as well as to find other avenues through which communities can insure for flood risk.6