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The Federal Emergency Management Agency (FEMA) flood insurance, also known as the National Flood Insurance Program (NFIP) is a program designed to let home and business owners in flood-prone areas purchase flood insurance from the United States government. This program is based on a partnership between FEMA and local communities, where the NFIP is permitted in exchange for community-based projects that attempt to manage and reduce the risks of future floods. FEMA flood insurance covers over 5.5 million properties in the United States, as of 2010.
Flooding is a constant danger in many areas of the continental United States. For many decades, the government tried to regulate flooding by building dams and providing disaster relief, which did little to mitigate the loss to property owners caught in the midst of a flood. The establishment of FEMA flood insurance came from a desire to help improve flood management by getting communities involved in the process, and also served to provide public insurance since private insurance companies would rarely offer coverage in high-risk areas. FEMA flood insurance and the NFIP were established by Congress in 1968 through the National Flood Insurance Act. It has since been modified several times by subsequent Acts, and is now under the domain of the Department of Homeland Security along with the rest of FEMA.
FEMA flood insurance determines areas of possible coverage through the use of floodplain maps known as flood insurance rate maps (FIRMs). Using calculations based on the past history of flood activity in the area, these maps divide the landscape into segments by risk of inundation. High risk areas, or those with more than a 1% chance of flooding in any given year, are given special consideration. Communities wishing to qualify for FEMA flood insurance must agree that all future development in high-risk areas will be done under careful management to reduce flood risks. Communities that fail to meet agreements can be placed on probation or dismissed from the program if changes are not made.
Some critics suggest that FEMA flood insurance can actually raise the risk of flood loss and put an unfair burden on the taxpayer. Undertaking flood management programs does not necessarily guarantee that no damage will be done by floods, and some properties in high-risk areas have received insurance payouts repeatedly after regular floods. Critics also suggest that the program actually encourages communities to develop in high-risk areas by promising insurance against property loss.