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Flood Insurance

Practice questions on flood insurance for the property exam, each with an answer and explanation.

Study questions and answers

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1. The National Flood Insurance Program is administered by which federal agency?

  1. The Department of Housing and Urban Development
  2. The Small Business Administration
  3. The National Association of Insurance Commissioners
  4. The Federal Emergency Management Agency (FEMA)
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D. The Federal Emergency Management Agency (FEMA)
FEMA manages the NFIP, which provides flood insurance to property owners in participating communities.

2. Under the NFIP Write Your Own program:

  1. Insurers write their own flood policy forms and set their own rates
  2. Private insurers sell and service flood policies under their own names while the federal government bears the risk
  3. Property owners may self-insure flood losses
  4. Only FEMA employees can sell flood policies
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B. Private insurers sell and service flood policies under their own names while the federal government bears the risk
WYO companies issue and service NFIP policies, but the policy form, rates and underwriting risk belong to the federal program.

3. For a single-family residence, what are the maximum NFIP limits available?

  1. $500,000 on the building and $500,000 on contents
  2. $100,000 on the building and $50,000 on contents
  3. $250,000 combined for building and contents
  4. $250,000 on the building and $100,000 on contents
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D. $250,000 on the building and $100,000 on contents
Homeowners can buy up to $250,000 of building coverage and up to $100,000 of contents coverage. Excess flood coverage is available in the private market.

4. What is the maximum NFIP building coverage for a nonresidential (business) building?

  1. $500,000
  2. $250,000
  3. $100,000
  4. $1,000,000
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A. $500,000
Business owners can buy up to $500,000 of building coverage and up to $500,000 of contents coverage through the NFIP.

5. A homeowner buys an NFIP policy on her existing home with no loan transaction involved. When does coverage generally begin?

  1. Immediately
  2. 30 days after purchase
  3. The next day
  4. 60 days after purchase
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B. 30 days after purchase
NFIP policies generally have a 30-day waiting period. Exceptions include coverage bought in connection with making, increasing, extending or renewing a loan.

6. A buyer purchases NFIP flood coverage at closing because the lender requires it for a new mortgage. The waiting period is:

  1. 30 days
  2. 15 days
  3. None; coverage starts at closing
  4. 60 days
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C. None; coverage starts at closing
The 30-day wait does not apply when flood coverage is purchased in connection with a new, increased, extended or renewed mortgage.

7. Which loss is NOT covered by a standard NFIP flood policy?

  1. Hotel bills while the flooded home is repaired
  2. Flood damage to the furnace
  3. Flood damage to the home's foundation
  4. Removal of flood debris from the home
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A. Hotel bills while the flooded home is repaired
The NFIP policy does not pay additional living expenses. It also excludes cars and limits coverage for items kept in basements.

8. Under the NFIP, a flood is generally defined as a general and temporary condition of inundation of normally dry land covering at least:

  1. One acre or one property
  2. Five or more acres
  3. Two or more acres or two or more properties
  4. Ten or more properties
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C. Two or more acres or two or more properties
The policy defines flood as inundation of two or more acres of normally dry land or of two or more properties, one of which is the insured's.

9. After a flood, a community requires a substantially damaged home to be elevated. The NFIP coverage that helps pay for this is:

  1. Loss of use coverage
  2. Increased Cost of Compliance coverage
  3. Ordinance or law coverage under the homeowners policy
  4. Replacement cost coverage
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B. Increased Cost of Compliance coverage
Increased Cost of Compliance pays toward elevating, floodproofing, relocating or demolishing a building to meet community floodplain rules, up to $30,000.

10. For a property owner to buy NFIP flood insurance, which condition must be met?

  1. The property must be in a high-risk flood zone
  2. The owner must have a federally backed mortgage
  3. The property must be less than 30 years old
  4. The property must be in a community that participates in the NFIP
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D. The property must be in a community that participates in the NFIP
NFIP coverage is available in participating communities, whether the property is in a high-risk or low- to moderate-risk area.

11. A homeowner with a federally backed mortgage on a home located in a Special Flood Hazard Area is generally:

  1. Prohibited from buying flood insurance
  2. Covered for flood automatically under the homeowners policy
  3. Exempt from flood insurance if the home has never flooded
  4. Required by the lender to carry flood insurance
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D. Required by the lender to carry flood insurance
Federal rules require flood insurance for buildings in high-risk areas that secure loans from federally regulated or insured lenders.
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