Under the terms of the so-called “50 percent rule,” structures sustaining 50 percent or more of their pre-disaster, fair market value are treated as new structures and must be repaired or rebuilt in accordance with current state and local ordinances that regulate new construction in the floodplain. Local government officials determine pre-disaster fair market values.

Only the structure is considered when determining the fair market value. The land is not included.

The 50 percent rule also applies to major renovations of existing structures — even if there is no damage.

If a building or structure is found to be “substantially damaged” under the 50 percent rule, it must be brought into compliance with floodplain management regulations. That generally means the owner must decide whether to elevate a structure above expected flood levels, to add structural reinforcements to strengthen the building or to relocate or demolish the structure. And, sometimes you are required to complete all those steps.

Property owners who have a flood insurance policy through the NFIP and a substantially damaged building (from flooding) in a SFHA may be able to use additional funds – known as Increased Cost of Compliance (ICC) – from their flood insurance policy (up to $30,000) to help defray the costs of elevating, relocating, demolishing a structure, or flood proofing a non-residential structure.

Contact your insurance agent: The rules and regulations that apply to federal flood insurance are complicated and your flood insurance specialist is best positioned to ensure you are appropriately covered.

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