Why has the federal government designated flood zones?
Historically, most private insurers have been unwilling to write flood insurance policies because of “adverse selection”-usually the only people who purchased the insurance were property owners who knew they were going to be flooded. As a result, most homeowners looked to the government to assist them in the event of a flood. Following a series of disastrous floods in the United States, for which taxpayers spent billions on relief funds, the federal government decided the best way to protect homeowners and taxpayers was to start requiring the purchase of flood insurance. Thus, the National Flood Insurance Program (NFIP) was born, and the federal government created Flood Insurance Rate Maps (FIRM) to show the levels of flood risk for different communities across the United States. These FIRMs were created through careful hydrological and engineering studies to identify specific flood-prone areas, known as Special Flood Hazard Areas (SFHA). The federal government now mandates that any ti
