Course Overview, Course Goal, and Objectives

Welcome to the Insurance Considerations course.

The course will provide an overview of the role of insurance in the Public Assistance process.

By the end of the course, State, Local, Tribal, and Territorial Applicants and Recipients will be able to understand most common insurance considerations, compliance, and requirements as it relates to the potential impacts of Public Assistance grant funding.

Upon successfully completing the course, participants will be able to:

  • Identify the most common types of insurance coverage
  • Explain the importance of disclosing and documenting all existing insurance policies early in the disaster recovery process
  • Summarize the process for insurance reviews, including documentation requirements, key roles, and responsibilities
  • Discuss how insurance coverages can potentially affect funding and conditions of the grant award
  • Identify where in Grants Portal insurance documents, reviews, and conditions are retained
Lesson 1 Overview and Objectives

This lesson provides a general overview of insurance document types and requirements from FEMA for Public Assistance grant funding. 

At the end of this lesson, participants will be able to:

  • Identify administrative requirements of the course
  • State the goals and objectives of the course
  • Identify the different types of insurance coverage
  • Describe the role of insurance as it relates to Public Assistance grant funding
  • Describe FEMA's insurance requirements for eligibility for Public Assistance grant funding
Insurance Definitions (1 of 2)

Insurance is defined by Merriam-Webster as:

  1. The business of insuring persons or property
  2. Coverage by contract whereby one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril
  3. A means of guaranteeing protection or safety
National Flood Insurance Program logo
Insurance Definitions (2 of 2)

FEMA defines insurance as:

Risk transfer from the insured to an insurer, where the insured agrees to pay a premium to the insurer, and in return the insurer agrees to reimburse the insured for covered losses to a property or properties if the losses are caused by designated hazards or perils.

Magnifying glass over an open dictionary
Types of Insurance Coverage

Insurance covers losses as a result of earthquakes, winds, fires, flood, and other disasters. There are many types of insurance coverage, including:

  • Blanket Policy
  • Insurance Pools
  • National Flood Insurance Program
  • Self-Insurance Plan
  • Standard Flood Insurance Policy
Insurance written out with difference types of insurance written around it, with small graphics to decipt
Types of Insurance: Blanket Policy

A Blanket Policy is a single insurance policy that provides multiple types of coverage and/or covers multiple properties.

Insurance graphic with a hand holding money, a family, a house, a car, a heart, and a plane flying above
Types of Insurance: Insurance Pools

Insurance Pools are two or more entities which agree to share their risks under a contractual agreement. A pool is not under the control of a single pool member and is governed by a board or similar organizational entity comprised of participating members.

A contract being talked over with one person's hands on the left and another person on the right with a pen
Types of Insurance: National Flood Insurance Program

National Flood Insurance Program is the program of flood insurance coverage and floodplain management administered under the National Flood Insurance Act of 1968, as amended, and applicable Federal regulations promulgated in 44 Code of Federal regulations, Subchapter B (Parts 50-149).

A community that participates in the National Flood Insurance Program must adopt and enforce a floodplain management ordinance that meets or exceeds the minimum National Flood Insurance Program requirements.

Such an ordinance must contain construction requirements for new construction or Substantial Improvement of buildings located in a Special Flood Hazard Area.

Four individuals talking at a National Flood Insurance Program meeting
Types of Insurance: Self-Insurance Plan

A Self-Insurance Plan is a formal means to manage risk through dedicated self-funding rather than through commercially available insurance. FEMA distinguishes a self-insurance plan from non-insurance, "rainy-day funds," or other forms of risk retention through evidence of fixed contributions and a formalized plan or system to pay losses as they occur.

The tops of many black umbrellas with one person holding up an orange umbrella
Types of Insurance: Standard Flood Insurance Policy

Standard Flood Insurance Policy is the flood insurance policy issued by the Federal Insurance Administrator or an insurer pursuant to an arrangement with the Federal Insurance Administrator pursuant to Federal statutes and regulations.

A flooded single level home surrounded by flood water and trees
First Source of Funding

Insurance is the first source of funding after a loss during the recovery process. FEMA requires the Applicant to take reasonable efforts to pursue claims to recover insurance proceeds that they are entitled to receive from the insurer(s).

If the Applicant expends costs to pursue its insurance claim, FEMA offsets the insurance reductions with the Applicant's reasonable costs to pursue the claim.

Coins on a desk next to a white model home with a person writing in the background
Duplicating Insurance Proceeds (1 of 2)

FEMA cannot provide Public Assistance grant funding that duplicates insurance proceeds. Consequently, FEMA reduces eligible costs by the amount of:

  • Actual insurance proceeds, if known, OR
  • Anticipated insurance proceeds based on the Applicant's insurance policy
    • If the amount of actual insurance proceeds is unknown, FEMA subsequently adjusts the eligible costs based on the actual amount of insurance proceeds the Applicant receives
Duplicating Insurance Proceeds (2 of 2)

FEMA requires the Applicant to take reasonable efforts to pursue claims to recover insurance proceeds that it is entitled to receive from its insurer(s).

If the Applicant expends costs to pursue its insurance claim, FEMA offsets the insurance reduction with the Applicant's reasonable costs to pursue the claim.

Insurance Authorities

The statute that authorizes FEMA to provide assistance via the Public Assistance Program is the Robert T. Stafford Act. The following sections of the Robert T. Stafford Act are insurance authorities that FEMA provides under the Public Assistance Program:

  • Title III - Major Disaster and Emergency Assistance Administration
    • Section 311, Insurance
    • Section 312, Duplication of Benefits
  • Title IV - Major Disaster Assistance Programs (applies to Major Disaster Declarations)
    • Section 403, Essential Assistance
Stafford Act, Section 311

Section 311 of the Robert T. Stafford Act discusses insurance and its requirements.

Applicants who receive Public Assistance grant funding for permanent work to replace, repair, reconstruct, or construct a facility must obtain and maintain insurance on that facility.

The Applicant must insure facilities with the types and extent of insurance reasonably available, adequate, and necessary to protect against future loss to the property.

If the Applicant does not obtain and maintain the required insurance from a previous disaster, then the facility is not eligible for Public Assistance funding in a subsequent disaster, regardless of the hazard(s) that caused the damage.

Stafford Act, Section 312

Section 312 of the Robert T. Stafford Act discusses duplication of benefits, special rules, and recovery of duplicative benefits.

FEMA is legally prohibited from duplicating benefits from other sources. If the Applicant receives funding from another source for the same work that FEMA funded, FEMA reduces the eligible cost or de-obligates funding to prevent a duplication of benefits.

Stafford Act, Section 403

Section 403 of the Robert T. Stafford Act applies to Major Disaster Declarations and discusses essential assistance.

Federal agencies may on the direction of the President, provide assistance essential to meeting immediate threats to life and property resulting from a major disaster.

Robert T. Stafford Act Title 4 USC Chapter 68 Subchapter I 5121

Robert T. Stafford Act Title 4 USC Chapter 68 Subchapter I 5121, discusses providing an orderly and continuing means of assistance by the Federal government to State and local governments in carrying out their responsibilities to alleviate the suffering and damage which result from such disasters by:

  1. Revising and broadening the scope of existing disaster relief programs
  2. Encouraging the development of comprehensive disaster preparedness and assistance plans, programs, capabilities, and organizations by the States and by local governments
  3. Achieving greater coordination and responsiveness of disaster preparedness and relief programs
  4. Encouraging individuals, States, and local governments to protect themselves by obtaining insurance coverage to supplement or replace governmental assistance
  5. Encouraging hazard mitigation measures to reduce losses from disasters, including development of land use and construction regulations
  6. Providing Federal assistance programs for both public and private losses sustained in disasters
44 Code of Federal Regulations

FEMA and any entity receiving Public Assistance must comply with all applicable Federal Regulations. The following are regulations that are a FEMA Public Assistance insurance authority:

  • 44 Code of Federal Regulations 206.250 (discusses insurance deductions)
  • 44 Code of Federal Regulations 206.252 (discusses insurance requirements for facilities damaged by a flood)
  • 44 Code of Federal Regulations 206.253 (discusses insurance requirements for facilities damaged by a disaster other than a flood)
FEMA Recovery Policy (FP206-086-1)

The FEMA Recovery Policy (FP206-086-1), Public Assistance Policy on Insurance, describes insurance reductions in detail and the requirement to obtain and maintain insurance.

The purpose of the Public Assistance Policy on Insurance, is to guide decision making and interpret statutes and regulations related to insurance requirements under FEMA's Public Assistance program.

Select this link to access the Public Assistance Policy on Insurance: Public Assistance Policy on Insurance

FEMA Recovery Policy (FP205-081-2)

 

The FEMA Recovery Policy (FP205-081-2), Disaster Grant Closeout Procedures, clarifies FEMA's requirements under Section 705 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, and establishes the guidelines to determine whether Section 705 applies, prohibiting FEMA from recovering payments made under the Public Assistance Program.

The purpose of this policy is to explain how FEMA implements Section 705 in order to ensure consistent application to Public Assistance program funding.

FEMA Recovery Policy RP9526.1 875x862 (png)
The Requirement to Obtain and Maintain Insurance (1 of 3)

When FEMA provides an Applicant assistance for permanent work to replace, restore, repair, reconstruct, or construct a facility, the Applicant must insure that facility against future loss.

FEMA refers to this as the requirement to "obtain and maintain" insurance, or, the "insurance requirement."

  1. By law, Applicants must comply with this requirement as a condition of FEMA assistance.
  2. FEMA applies this requirement to buildings, contents, equipment, and vehicles.
  3. FEMA does not require Applicants to obtain and maintain insurance for temporary facilities.
Graphic of family in front of a home covered with an umbrella that says "Check your insurance to ensure you have enough coverage" On a green bar it says, "#BeInformed" and "Ready"
The Requirement to Obtain and Maintain Insurance (2 of 3)

44CFR 206.253 states (in part): The Applicant is not required to obtain and maintain insurance on facilities for sustained eligible damages in an amount not exceeding $5,000 in eligible costs (prior to any reductions). Those facilities will not have an obtain and maintain requirement.

44CFR 206.252 states (in part): The requirement to purchase flood insurance on flood damaged facilities is waived when eligible damages for the insurable project do not exceed $5,000.

The Applicant may request that FEMA modify the insurance requirements when:

  • The required insurance is not reasonably available
  • An alternative to the insurance requirement provides adequate protection against future loss to the property
  • The required insurance is not necessary to protect against future loss to the property
An insurance company inspector is assisting a survivor fill out forms on a clipboard
The Requirement to Obtain and Maintain Insurance (3 of 3)

Additionally, FEMA does not require greater types and amounts of insurance than are certified as reasonably available, adequate, or necessary by the appropriate State Insurance Commissioner.

The State Insurance Commissioner cannot waive the Federal insurance requirement, but may certify the types and extent of insurance are not reasonably available to protect against future loss to an insurable facility.

The Applicant may comply with the insurance requirement for both flood and non-flood hazards with coverage available through commercial property insurance, which may include blanket insurance policies, standard flood insurance policies, insurance pools, or a combination of these sources.

In some cases, with FEMA approval, the Recipient may comply with the insurance requirement using a self-insurance plan.

A State Insurance Commissioner providing materials for flood impacted residents at a table
Insurance Reductions

When the Applicant receives Public Assistance funding for a facility damaged by the same hazard in a subsequent disaster, FEMA reduces funding in this subsequent disaster by the amount of insurance required from the previous disaster.

If FEMA or the State Insurance Commissioner certification modified the Applicant's insurance requirement, FEMA reduces funding to the modified insurance amount.

If the Applicant's anticipated or actual insurance proceeds are higher than the amount of insurance required in the previous disaster, FEMA reduces funding by the anticipated or actual amount of insurance proceeds to avoid a duplication of benefits.

Duplication of Benefits

FEMA provides assistance under its Individual Assistance programs and Hazard Mitigation Grants Program that could duplicate assistance that is available under the Public Assistance Program. FEMA must ensure it does not duplicate funds in areas where its programs overlap.

If the Applicant receives funds from another Federal Agency for the same purpose as Public Assistance funding, it is a duplication of benefits. FEMA cannot duplicate funds provided by another Federal agency.

The Applicant should work with private property owners to pursue and recover insurance proceeds and credit FEMA the Federal share of any insurance proceeds received.

An insurance company employee smiling at a survivor that she is helping
Special Flood Hazard Areas (1 of 4)

Special Flood Hazard are areas that are subject to inundation during a 100-year flood (a flood having a 1 percent chance of occurrence in a given year).

For a facility that is insurable by the National Flood Insurance Program that is also located in a Special Flood Hazard Area, FEMA must reduce Public Assistance funding when the facility is:

  • Located in an area that FEMA has identified as a Special Flood Hazard Area for more than 1 year
  • Damaged by flooding
  • Uninsured for flood loss
  • Insured for flood loss that is less than the maximum amount available under a Standard Flood Insurance Policy
Residential area showing flooded houses with a few trees
Special Flood Hazard Areas (2 of 4)

If the Applicant believes that its property is incorrectly identified on a Flood Insurance Rate Map, the Applicant may request a Letter of Map Amendment or Letter of Map Revision to FEMA within 6 months of the disaster declaration.

If the Applicant's request is approved and FEMA determines that the property is not located in a Special Flood Hazard Area, FEMA may reinstate Public Assistance funding.

Costs incurred in pursuit of a Letter of Amendment or Letter of Map Revision are not eligible for Public Assistance grant funding.

An individual holding a flood map and related information
Special Flood Hazard Areas (3 of 4)

If the Applicant does not have flood insurance for the facility or carries inadequate flood insurance for the insurable facility. FEMA will reduce eligible project costs by the maximum amount of insurance proceeds that could have been obtained from a National Flood Insurance Program standard flood insurance policy for the building and its contents

Flooded Target store
Special Flood Hazard Areas (4 of 4)

FEMA does not apply this reduction to Private Non-Profit facilities in communities that do not participate in the National Flood Insurance Program.

However, for FEMA to provide Public Assistance grant funding for the Private Non-Profit facility, the community must agree to:

  • Participate in the National Flood Insurance Program within 6 months of the declaration
  • Must purchase the required flood insurance; OR
  • Must obtain and maintain flood insurance from another source.
The outside of a flooded school in Texas
Lesson 1 Summary

In this lesson, you learned how to:

  • Identify Administrative requirements of the course
  • State the goals and objectives of the course
  • Identify the different types of insurance coverage
  • Describe the role of insurance as it relates to Public Assistance grant funding
  • Describe FEMA's insurance requirements for eligibility for Public Assistance grant funding

The next lesson will provide an overview of the common types of insurance policies and the documentation Applicants must submit to FEMA when applying for Public Assistance grant funding.