The NFIP, Flood Insurance, and Community Associations

Section 1: Overview — Flood coverage as an association obligation

Ordinary property insurance excludes flood damage. That exclusion is the reason a community association with buildings in a special flood hazard area (SFHA) carries separate flood coverage, and the reason unit owners' mortgage lenders usually force the question before the board gets to it. Most of that coverage comes from the National Flood Insurance Program (NFIP), which the National Flood Insurance Act of 1968, 42 U.S.C. § 4001 et seq., created and which FEMA administers. The NFIP holds about 4.7 million policies providing roughly $1.3 trillion in coverage, and private insurers take a growing minority of the market.¹ A separate statute supplies the mandatory purchase requirement. The Flood Disaster Protection Act of 1973, codified at 42 U.S.C. § 4012a, obligates federally regulated or insured lenders to require flood insurance on improved real estate securing a loan when the building sits in an SFHA in a participating community.² A condominium association insures its building under the Residential Condominium Building Association Policy (RCBAP); a non-condominium association insures its common buildings under the General Property Form.³ The RCBAP carries an 80 percent coinsurance provision, so an association that insures the building for less than 80 percent of its replacement cost value recovers only a proportional share of a partial loss.⁴ FEMA prices new and renewing policies under Risk Rating 2.0, a property-specific methodology that replaced zone-based rating.⁵ The program itself runs on short-term authority: as verified on congress.gov on July 28, 2026, the Consolidated Appropriations Act, 2026 extends NFIP authority through September 30, 2026.⁶ The sections that follow set out the statutes, the policy forms, the coinsurance mechanic, the pricing regime, and the reauthorization cycle in detail.

Section 2: The program and the policy forms

2A. The statutes and the mandatory purchase requirement

The National Flood Insurance Act of 1968 established the NFIP as a voluntary program: communities adopt floodplain management rules, and in exchange property owners in those communities may buy federally backed flood insurance. FEMA administers it.¹ The statute is short. Almost every operative detail, including coverage limits, policy forms, rating factors, and deductibles, lives instead in FEMA's Flood Insurance Manual and the Standard Flood Insurance Policy forms, which FEMA revises on a cycle. The current manual took effect in October 2025.⁷

The mandatory purchase requirement binds the lender, not the association. Under 42 U.S.C. § 4012a, a federally regulated or insured lending institution may not make, increase, extend, or renew a loan secured by improved real estate in an SFHA in a participating community unless flood insurance covers the building for the term of the loan.² The obligation runs to the lender. The association ends up carrying coverage because unit owners cannot close or keep their mortgages without it. FEMA's Flood Insurance Rate Maps determine whether a building sits in an SFHA, and lenders document that finding on the Standard Flood Hazard Determination Form.⁸

Two boundary rules matter. Federal flood insurance is unavailable for most new construction and substantial improvements within units of the Coastal Barrier Resources System, a restriction the U.S. Fish and Wildlife Service administers under the Coastal Barrier Resources Act.⁹ Separately, Fannie Mae, Freddie Mac, and FHA project standards impose their own flood-coverage conditions on condominium projects, a subject the Fannie Mae and Freddie Mac Condo Project Standards page takes up.

2B. The RCBAP and how condominium flood coverage is structured

The condominium association buys the RCBAP in the association's own name, and the policy insures the entire residential condominium building, including common elements and the improvements within individual units that form part of the building.⁴ It is available for buildings in which at least 75 percent of the floor area is residential.¹⁰ Building coverage runs up to the lesser of the building's replacement cost value or $250,000 multiplied by the number of units.³ A 40-unit building can therefore carry up to $10,000,000 in building coverage under a single RCBAP.

The 80 percent coinsurance provision is the item people state most loosely, and it is the one that decides how much of a partial loss the program pays. Section VII of the RCBAP form imposes a penalty on the loss payment unless the amount of insurance on the building reaches at least the lesser of 80 percent of the building's full replacement cost value at the time of loss or the maximum amount of insurance available under the NFIP.⁴ Below that threshold, loss payment equals the amount of insurance carried divided by the amount required, multiplied by the loss, less the deductible.⁴ Work it once. A building with a replacement cost value of $1,000,000 must carry at least $800,000 of insurance to avoid the penalty. If the association insures it for $600,000 and suffers a $200,000 partial loss, recovery comes to ($600,000 / $800,000) times $200,000, or $150,000, before the deductible comes out. The remaining $50,000 lands on the association and its members. Partial losses are the common case, which is why the provision matters more than the headline limit.

Deductibles come out of the loss, not out of the limit of liability, and separate deductibles apply to building and to contents coverage.¹¹ An RCBAP's building coverage does not include contents (personal property) coverage, so an association that wants to cover commonly owned contents must add it separately.¹¹

Unit owners layer their own Dwelling Form policies above the RCBAP. The Dwelling Form covers a unit owner's contents (up to $100,000) and includes condominium loss-assessment coverage, which responds up to the building coverage limit to assessments levied against unit owners for flood damage to common building elements.¹² Two conditions ride along with that coverage: it cannot satisfy the RCBAP's 80 percent coinsurance requirement, and combined payments under a Dwelling Form policy and the RCBAP cannot exceed $250,000 for a single unit.¹³

Associations that are not condominiums, and that own clubhouses, pool houses, or maintenance buildings, insure those structures under the General Property Form, which covers building and contents up to $500,000 each and contains no coinsurance clause.¹⁴

2C. Pricing, authority, and the private market

Risk Rating 2.0, which FEMA brands Equity in Action, replaced the NFIP's zone-based rating with property-specific pricing that draws on characteristics such as distance to a water source, elevation, and rebuilding cost. FEMA phased it in beginning October 1, 2021 for new policies and for renewing policies eligible for decreases, then applied it to all remaining policies on renewals beginning April 1, 2022.⁵ Statutory caps limit how fast a policy moves toward its full-risk rate. For most policies the annual increase is capped at 18 percent. The Homeowner Flood Insurance Affordability Act of 2014 sets that cap, codified at 42 U.S.C. § 4015(e), which permits individual-policy increases of up to 18 percent while limiting rate-class increases to 15 percent.¹⁵ Certain categories carry a higher statutory increase of up to 25 percent per year: non-primary residences, business and other non-residential properties, severe repetitive loss properties, and substantially damaged or improved properties.¹⁶ Fees and surcharges sit outside the cap, so a bill can rise by more than the capped percentage.⁵

Litigation over the affordability of Risk Rating 2.0 remains pending. In Louisiana v. Mayorkas, ten states and a group of Louisiana parishes and levee districts sued FEMA in the Eastern District of Louisiana to have the methodology declared unlawful. On March 28, 2024 the court allowed the states and three parishes to proceed on standing but denied a preliminary injunction, expressly declining to address the plaintiffs' likelihood of success on the merits, and the case remains pending.¹⁷

NFIP authority has run on short-term extensions since the last long-term reauthorization expired at the end of FY2017. The Congressional Research Service counts 35 short-term reauthorizations enacted since then, with several brief lapses.¹⁸ As verified on congress.gov on July 28, 2026, the current authorization runs through September 30, 2026 under the Consolidated Appropriations Act, 2026.⁶ A lapse has consequences: FEMA cannot issue new policies or renew expiring ones, which delays closings that require flood coverage. Policies already in force generally remain effective through their terms, and FEMA continues paying claims with available funds.¹⁸ A private flood market operates alongside the NFIP and now accounts for a growing minority of residential flood policies. A 2019 joint rule issued by the federal banking agencies requires regulated lenders to accept a private flood policy that meets the statutory definition of private flood insurance, and permits discretionary acceptance of certain other policies.¹⁹

Section 3: What associations must insure and disclose for flood

A. Determining exposure and requirement

FEMA's Flood Insurance Rate Maps determine flood-zone status building by building, and a structure partly in and partly out of an SFHA is treated according to where the insurable building sits.⁸ Federal law (42 U.S.C. § 4012a) attaches the purchase obligation to the lender, not the association, and only for buildings in an SFHA securing a federally regulated loan.² The recorded declaration, by contrast, may require flood coverage regardless of zone. These are distinct sources, and conflating them produces the wrong answer. The Standard Flood Hazard Determination Form and the FIRM panel document the finding.⁸

B. Sizing coverage and the coinsurance decision

Building coverage should be measured against replacement cost value, because the RCBAP settles building losses on a replacement-cost basis when the association meets the 80 percent threshold and prorates them when it does not.⁴ Insuring to a figure below 80 percent of replacement cost value reduces recovery on every partial loss by the coinsurance ratio, as worked in Section 2B.⁴ The NFIP requires the association to re-evaluate replacement cost value at least every three years, supported by a recent valuation report or a signed statement from an association officer.¹¹ Nothing here recommends a coverage level for any particular association; it states the documented mechanic.

C. Coordinating with the master property policy and unit owners

The RCBAP covers the building and its fixtures but not unit owners' personal property, and combined RCBAP and Dwelling Form payments are capped at $250,000 for any single unit.¹³ In practice, agents tell unit owners that a Dwelling Form policy is the layer that covers their contents and can respond to a loss assessment, subject to the condition that assessment coverage cannot satisfy the association's coinsurance requirement.¹² The recorded declaration and state condominium law allocate which party carries which layer. The NFIP does not.

D. Budget, disclosure, and closing-cycle practice

Premiums move annually under Risk Rating 2.0, within the statutory caps, so the flood line in an annual budget is not a fixed number.¹⁵ An uninsured or under-insured loss, including a coinsurance shortfall, typically comes out of reserves or a special assessment, which is a governing-document and state-law matter rather than an NFIP matter. Resale practice commonly requires disclosure of flood-zone status and of the association's flood coverage, again a state-law and declaration duty. A reauthorization lapse is a closing risk, because FEMA cannot issue or renew a policy during a lapse.¹⁸

Section 4: Recent program changes, litigation, and legislative activity

A. Recent program and rulemaking activity

B. Litigation and federal court decisions

C. Reauthorization and legislation

The current reauthorization vehicle is the Consolidated Appropriations Act, 2026, which extends NFIP authority through September 30, 2026, as verified on congress.gov on July 28, 2026.⁶ Congress has enacted no long-term reauthorization since the FY2017 authority expired, and the program has continued on 35 short-term extensions since then, with several brief lapses.¹⁸

Section 5: Interaction with state law and related coverage

The NFIP sets what federal flood coverage is available and what lenders must require. State law and the recorded declaration decide what the association must actually carry, how a flood loss is allocated between the association and unit owners, and what must be disclosed on resale. Several states impose their own association insurance minimums and windstorm or flood disclosure duties on top of the federal layer, and those overlays vary widely. What the NFIP does not cover after a declared disaster, including additional living expenses and losses above policy limits, is the subject of the FEMA Disaster Assistance page. Readers sizing an association's obligations should go next to the state Insurance Requirements and Budget Approval columns in the state matrix.

HOA Weekly's NFIP coverage updates quarterly, and each cycle re-verifies the reauthorization date, the coverage limits, and the coinsurance figures against congress.gov and the current FEMA Flood Insurance Manual. State insurance overlays appear throughout the state matrix, in the Insurance Requirements and Budget Approval columns.

Footnotes

1. National Flood Insurance Act of 1968, 42 U.S.C. § 4001 et seq.; FEMA, Flood Insurance program overview (policies in force and coverage totals) ↩
2. Flood Disaster Protection Act mandatory purchase requirement, 42 U.S.C. § 4012a ↩
3. FEMA, NFIP Flood Insurance Manual (October 2025), RCBAP section ↩
4. FEMA Form F-144, RCBAP Standard Flood Insurance Policy, Section VII (Coinsurance) ↩
5. FEMA, Risk Rating 2.0: Equity in Action (April 2025) ↩
6. H.R.7148, Consolidated Appropriations Act, 2026 (Pub. L. 119-75), extending NFIP authority through September 30, 2026 ↩
7. FEMA, Flood Insurance Manuals and Handbooks (October 2025 manual) ↩
8. FEMA, Flood Insurance program overview and flood mapping ↩
9. U.S. Fish and Wildlife Service, CBRA and Federal Flood Insurance ↩
10. FEMA, Summary of Coverage: Residential Condominium Buildings (May 2024) ↩
11. FEMA, Summary of Coverage: Residential Condominium Buildings (deductibles taken from loss; contents not included; RCV re-evaluation every three years) ↩
12. FEMA, NFIP condominium guidance: Dwelling Form loss-assessment coverage and its conditions ↩
13. FEMA Form F-144, RCBAP SFIP, Section I.G ($250,000 combined per-unit benefit cap) ↩
14. FEMA, Homeowner Flood Form NPRM (89 Fed. Reg. 8282), describing General Property Form building and contents limits per 44 C.F.R. pt. 61, App. A(2) ↩
15. 42 U.S.C. § 4015(e); Homeowner Flood Insurance Affordability Act of 2014, Pub. L. 113-89 (18% individual / 15% rate-class annual caps) ↩
16. Congressional Research Service, Introduction to the NFIP (R44593) (25% category increases; program figures) ↩
17. Louisiana v. Mayorkas, No. 2:23-cv-01839 (E.D. La.), order of March 28, 2024 (motion to dismiss granted in part; preliminary injunction denied) ↩
18. Congressional Research Service, What Happens If the NFIP Lapses? (IN10835) (35 short-term reauthorizations since FY2017; lapse consequences) ↩
19. Loans in Areas Having Special Flood Hazards, final rule, 84 Fed. Reg. 4953 (Feb. 20, 2019) (mandatory and discretionary acceptance of private flood insurance) ↩
20. FEMA, Standard Flood Insurance Policy, Homeowner Flood Form, NPRM, 89 Fed. Reg. 8282 (Feb. 6, 2024) ↩