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JULY 2020

The National Flood Insurance Program and New Jersey

By Jake Bradt, Carolyn Kousky, and Zoe Linder-Baptie

Wharton Risk Management and Decision Processes Center, Wharton School, University of Pennsylvania

New Jersey residents and visitors enjoy the amenities that come with its more than 1,800 miles of coastline, as well as interior rivers and other waterways. While supporting recreation, tourism, and many sectors of the economy, these waterways and coasts also introduce flood risk. New Jersey can experience coastal tidal flooding, storm water flooding, riverine flooding, and storm surge. Coastal flooding can be particularly damaging. The coastal zone covers 3,218 square miles and is home to 239 diverse communities. New Jersey is also incredibly dense in its urban areas, with 53 percent of the state’s total population residing in the coastal zone along the shore and rivers, putting their homes and businesses at risk of flooding.1,2

Flood insurance can protect residents financially from the risk of property damage from floods. While flood damage is typically not covered by standard homeowners policies, flood coverage is available through the federal National Flood Insurance Program (NFIP).3 The NFIP, founded in 1968, is housed within the Federal Emergency Management Agency (FEMA) and is a voluntary partnership between the federal government and local communities. As of August 2019, 553 of New Jersey’s 565 municipalities participate in the NFIP.4

When communities join the NFIP, they must implement certain floodplain management regulations for new construction within the FEMA-mapped 100-year floodplain, the area with a 1% annual chance of flooding, also referred to as the Special Flood Hazard Area (SFHA).5 This area is shown on FEMA Flood Insurance Rate Maps (FIRMs). These maps divide the SFHA and the area beyond it into different flood zones. The A zones are the SFHA subject to flooding from rivers or streams or shallow flooding areas. V zones are narrow strips along the coast that are in the SFHA and also subject to storm waves.

Once a community joins the NFIP, all properties can be insured through the program, including residences, commercial structures, and municipal buildings. A residential property owner can purchase up to $250,000 of coverage for their building and up to $100,000 of coverage for its contents. Renters can purchase a contents-only policy. Non-residential property owners, such as commercial and municipal properties, can purchase up to $500,000 of coverage each for the structure and its contents. When a flood occurs, the policyholder will be reimbursed for damage up to the coverage limit they choose.

Early in the history of the NFIP, Congress responded to low take-up rates for flood insurance with the mandatory purchase requirement: federally regulated lenders or issuers of federally-backed mortgages must require flood insurance on all loans secured by property in the SFHA. This helped increase the number of flood insurance policies purchased, but flood risk persists outside the SFHA. Despite this, few people insure when not mandated to do so. This is due to a combination of poor understanding about the risk, lack of understanding about the role of flood insurance in recovery, as well as beliefs that flood insurance is too expensive, and/or budget constraints. Research indicates that premiums are often cost prohibitive for low income households. There are ongoing efforts to make changes to the NFIP program as well as to find other avenues through which communities can insure for flood risk.6

NJ tract NFIP takeup 2018In New Jersey there were 250,561 policies-in-force (including both commercial and residential policies) across the state in 2018, the most recent full year for which data are available.7 This makes New Jersey fourth in the nation in terms of NFIP policies behind Florida, Texas, and Louisiana. NFIP policies tend to be concentrated in coastal areas. Figure 1 shows take-up rates for all NFIP policies in New Jersey by census tract (that is, the number of NFIP policies in each tract divided by the number of housing units in each tract). Note that census tracts are small areas of about 4,000 inhabitants and do not correspond to political boundaries. As seen in the figure, take-up rates are much lower away from the coast but can exceed 75% for tracts that border the ocean.

The number of policies-in-force in New Jersey has been declining in recent years as shown in Figure 2. Policies were increasing and then spiked after Hurricane Sandy; this could be due to greater purchases after the storm brought attention to flood risk, but also is due to the requirement that recipients of federal disaster aid purchase flood insurance.8 Due to a lack of comprehensive and detailed data on flood insurance provided by the private sector, it is impossible to determine how much of this recent decline has been offset by an increase in private-sector flood insurance policies.

Figure 2: NFIP Policies-in-Force in New Jersey by YearNFIP PREMIUMS
Currently, annual premiums for an NFIP policy vary by FEMA mapped flood zones, as well as by other characteristics of the building, including when it was constructed and its elevation. Figure 3 shows the average premiums for policies in New Jersey. The highest prices are for properties in the V zone – the area of the SFHA also subject to waves and storm surge. The average annual New Jersey premium in the V zone was $4,738 in 2018. In the A zone, the average premium was $1,272. Outside the SFHA, properties with a favorable loss history may qualify for a Preferred Risk Policy (PRP),9 which costs substantially less. The median for a PRP policy was $410. Note that premiums also vary based on how much coverage is purchased.

As of August 2019, New Jersey policyholders had cumulatively received roughly $5.268 billion (2018 USD) in total payments on 160,169 claims, only 7.57% of which were for commercial properties. The overwhelming majority of claims paid were in 2012 for Hurricane Sandy. This is seen clearly in Figure 4, which shows claims made to the state in billions of 2018 USD by year. The year Sandy hit – 2012 – shows close to $4 billion in losses paid on over 68,000 claims, only 3.94% of which were for commercial properties. (Larger firms may have comprehensive property insurance from a private carrier and not use the NFIP. Small businesses, though, are often uninsured and would use the NFIP for flood coverage similar to a household.)

Figure 5 claims paidAs might be expected, given the storm, and the earlier figure showing where NFIP policies are concentrated, claims have largely been concentrated on the coast, as well. The most claims are in areas of higher take-up where Sandy had an impact – this is seen in Figure 5. In the week after Hurricane Sandy made landfall, the average claim was $151,244 (2018 USD) for commercial properties and $59,997 for residential properties. This highlights the importance of insurance in financial recovery from disasters. In contrast to the almost $60,000 that was paid on average for flood insurance claims, FEMA individual Assistance grants averaged only a bit more than $8,000 (which includes some funds for uninsured costs, such as temporary housing). This is because post-disaster FEMA grants are only to make homes safe and habitable, not bring them back to pre-disaster conditions.

Since 1990, the NFIP has encouraged communities to join the Community Rating System (CRS), a voluntary program designed to encourage more investment in flood risk reduction. Class levels range from 1 to 10 with Class 1 providing the highest discount on premiums. A CRS community earns points for activities undertaken to better manage flood risk, including providing improved information on flood risk and flood insurance to residents. As a community moves up through levels in the program, their residents are rewarded with discounts on flood insurance. Note that PRP policies do not receive CRS discounts, as they are already a more favorable price. As of August 2019, 96 of the 553 New Jersey communities participating in the NFIP are in the CRS program. Many of these communities have a Class 5 or higher, indicating they have adopted many flood risk management policies. This includes Ocean City, Brigantine, Sea Isle City, and Long Beach.10

As discussed, flood insurance is a critical component of financial recovery from flood events. Many households lack sufficient savings to rebuild on their own and federal aid is limited and delayed. Unfortunately, however, those who often need insurance the most are least able to afford it. FEMA and scholars have proposed a means-tested assistance program to help lower-income families afford flood coverage, but Congress has yet to adopt and enact this change.11 As climate change increases flood risk, particularly along the coast, flood insurance will also have to be complemented by aggressive investments in risk reduction and risk communication to promote resiliency of New Jersey communities.


1 “Climate Change Resilience Strategy.” New Jersey Department of Environmental Protection. 2020.

2 Kopp, R.E., C. Andrews, A. Broccoli, A. Garner, D. Kreeger, R. Leichenko, N. Lin, C. Little, J.A. Miller, J.K. Miller, K.G. Miller, R. Moss, P. Orton, A. Parris, D. Robinson, W. Sweet, J. Walker, C.P. Weaver, K. White, M. Campo, M. Kaplan, J. Herb, and L. Auermuller. New Jersey’s Rising Seas and Changing Coastal Storms: Report of the 2019 Science and Technical Advisory Panel. Rutgers, The State University of New Jersey. Prepared for the New Jersey Department of Environmental Protection. Trenton, New Jersey.

3 While there is a small, but growing, private market for residential flood insurance, nationally, as well as in New Jersey, the overwhelming number of residential flood policies are still with the NFIP—our focus in this brief.

4 “New Jersey – Top 50 National Flood Insurance Program (NFIP) Policy Count Communities and Community Rating System (CRS) Participation.” CRS Resources. 2020.

5 “Floodplain Management Requirements.” FEMA. 2020.

6 See more in Kousky, C., Shabman, L., Linder-Baptie, Z., St. Peter, E. (2020) Perspectives on Flood Insurance Demand Outside the 100-Year Floodplain. Philadelphia, PA: Wharton Risk Management and Decision Processes Center, University of Pennsylvania. and Shabman, L., Kousky, C., Lingle, B. (2019). The Mandatory Purchase Requirement: Origins and Effectiveness in Achieving NFIP Goals. Philadelphia, PA: Wharton Risk Management and Decision Processes Center, University of Pennsylvania.

7 In-force policies are counted as the number of insured units across all relevant contracts which are active in a given year. Data on the number of insured units for contracts covering multiple units (e.g., condominiums) are used to count the number of policies-in-force. So while a contract covering 10-units within a condominium only appears once in the data, the policies-in-force figure accounts for the fact that the single contract includes 10 insured units. Unless otherwise noted, all statistics and figures include both commercial and residential policies.

8 Kousky, C. (2017). “Disasters as Learning Experiences or Disasters as Policy Opportunities? Examining Flood Insurance Purchases after Hurricanes.” Risk Analysis 37(3): 517-530.

9 To qualify for a PRP rate, a property must be in a B, C, X, AR or A99 zone on the policy effective date and at each renewal (no grandfathering of PRP rates) in addition to having a favorable loss history. A property does not meet the condition for favorable loss history if any of the following conditions are met for the prior 10 years: (1) three or more NFIP claims for separate events, (2) two flood claims in excess of $1000 each for two separate events, (3) three separate Federal flood disaster relief payments (grants or loans), (4) two Federal flood disaster relief payments in excess of $1000, or (5) one flood insurance claim and one Federal flood disaster relief payment, both in excess of $1000.

10 “New Jersey – Top 50 National Flood Insurance Program (NFIP) Policy Count Communities and Community Rating System (CRS) Participation.” CRS Resources. 2020.

11 See: FEMA (2018). An Affordability Framework for the National Flood Insurance Program. Washington, DC, Department of Homeland Security, Federal Emergency Management Agency.April 17; National Research Council (2015). Affordability of National Flood Insurance Premiums: Report 1. Washington, DC, National Academies Press

Meet the Climate Corps

Angel Alguera, Rutgers Climate CorpsAngel Alguera
I am a first-year Atmospheric Science master’s degree student in the Department of Environmental Sciences, and my work focuses on meteorology and applications of climate change resiliency. My professional interests include severe weather forecasting and community preparedness regarding weather-related disasters. I work with Dr. James Shope at the NJ Climate Change Resource Center to produce applied research and reports relevant to New Jersey stakeholders. I currently assist with climate change data analysis, large dataset management, and report writing.

Daniel GilkesonDaniel Gilkeson
I’m a second-year master’s student in the City and Regional Planning Program with a concentration in environmental planning. As a planner, I hope to build more resilient communities in the face of increased risk due to climate change. With the Climate Change Resource Center, I am working on a project to aid the state in an update of its floodplain buyout program, known as Blue Acres, to be more proactive and comprehensive. Prior to this position, I interned in the Community and Economic Development Office at the Delaware Valley Regional Planning Association. I’m also an AmeriCorps alum, having completed a year of service working on affordable housing in Nashville, Tennessee.

Benjamin GoldbergBenjamin Goldberg
I am a second-year Master of City and Regional Planning student concentrating in climate adaptation and resiliency planning, with experience in sustainable food systems. I joined the Climate Corps last summer to help develop a GIS-based food waste recovery tool, and currently support community resilience through flood vulnerability analysis. I hold a B.A. from Middlebury College and a Certificate in Ecological Horticulture from UC Santa Cruz.

Surya Jacob, Rutgers Climate CorpsSurya Jacob
I am a graduate student in the Master of City and Regional Planning program at the Bloustein School concentrating in community development, focused on housing, land and finance, as well as pursuing the Real Estate Development/Redevelopment Certification. Prior to Bloustein, I worked as an architect and interior designer in India and Canada and am pivoting towards a career in urban planning to engage in extensive projects at the macro level. My interests include affordable and mixed income housing, urban redevelopment, and housing finance, and I am deeply passionate about climate resilience in community planning. Being part of Climate Corps is a foundational step towards helping to solve equity issues in vulnerable communities along the coastal region.

Vineesh Das Kodakkandathil, RutgersVineesh Das Kodakkandathil
I am an urban planner with five years of professional experience in community-led ecotourism development and land use and environment management planning in ecologically sensitive areas. I have worked on and conducted extensive environmental sensitivity analyses, flood and landslide vulnerability assessments, and human impact assessments with the help of GIS tools. I’m currently pursuing my master’s in City and Regional Planning at Bloustein School with a concentration in Transport Planning and GIS.

Douglas LeungDouglas Leung
I am working with the Climate Change Resource Center to identify vulnerable communities and places affected by climate-induced flooding in coastal New Jersey municipalities. I am a Master of City and Regional Planning candidate at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. As a planner, I want to develop strategies and solve problems affecting our cities and communities that enable more equitable outcomes in housing and transportation. I am also a recent Army veteran, having served as a company commander of recruiting in the northern suburbs of Chicago and as a reconnaissance platoon leader in the 10th Mountain Division. For fun, I enjoy weightlifting, running, reading fiction, and board games.

Nihar MhatreNihar Mhatre
I am a master’s candidate in city and regional planning at Rutgers University’s Edward J. Bloustein School of Planning and Public Policy, focusing on urban design and land use planning. Before being accepted at Rutgers, I worked as an architect at JD Studio and had my own architectural practice, Vastu Insights. My research interests revolve around designing and developing climate change adaptation and resilience strategies to promote equity in urban landscapes. Having the opportunity to work on real-world projects through Climate Corps will be an essential step in the development of my understanding of addressing climate change issues in vulnerable regions.

Justin MorrisJustin Morris
Justin is a master’s student at Rutgers University studying discovery informatics and data sciences. He is working under Professor Mark Rodgers to develop an optimization model that will act as a decision support tool for university financial investments with the end goal of eliminating Rutgers’ scope 2 emissions. He is excited to apply his background in data analytics and mathematical programming to help the university fight climate change.

Josephine O'GradyJosephine O’Grady
I am a first-year student in the Master of Public Policy program. Through the Coastal Climate Risk and Resilience (C2R2) certification, I am focusing a significant portion of my graduate coursework on topics including coastal geomorphology, environmental justice, and hazard mitigation planning. Before beginning my studies at the Bloustein School, I received my bachelor’s degree in public health from Kean University, where I first became interested in how coastal dynamics shape lived experiences. I previously served as an intern at the New Jersey State Policy Lab and currently work for the Megalopolitan Coastal Transformation Hub (MACH) team.

Jessica Parineet Jessica Parineet
I am a first-year Master of Public Policy student at the Bloustein School with a strong interest in climate change policy and related topics. In my previous work, I gained experience in a number of dimensions of climate change issues through carbon capture storage research, urban heat island research, and community level engagement as I am currently on the Student Advisory Board for the Rutgers Office of Climate Action. I am excited to expand on my interests in environmental justice and local level resilience planning through my involvement in the Climate Corps.

Dillon Patel Dillan Patel
I am a second-year Master of City and Regional Planning student concentrating in Environmental Planning and International Development. I have previously worked as an economist performing cost-benefit analysis and conducting monitoring and evaluation for renewable energy in developing countries. I have also spent a summer in western Massachusetts mapping stormwater infrastructure and working with planners to identify suitable places for green stormwater infrastructure.

Moira Sweeder, Rutgers Climate CorpsMoira Sweeder
I am a graduate student enrolled in the Master of City and Regional Planning program at the Bloustein School. My concentration is environmental planning with a focus on coastal resilience. Before pursuing my master’s degree at Rutgers, I studied sustainability at Stockton University. During this time, I interned for the PSEG Institute of Sustainability Studies, the Jacques Cousteau National Estuary Research Reserve, and NJ Audubon. I am thrilled to now be a part of the Climate Corps, researching coastal resilience as a part of the Megalopolitan Coastal Transformation Hub (MACH) team.

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