Applicants that receive PA funding for permanent work to replace, repair, reconstruct, or construct a facility must obtain and maintain insurance to protect the facility against future loss.218 This requirement applies to insurable facilities or property (buildings, contents, equipment, and vehicles). FP 206-086-1, Public Assistance Policy on Insurance, describes these requirements in detail.219

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.220 The type of insurance refers to the hazard(s) that caused the damage and extent refers to the amount of insurance required, which is calculated based on the eligible costs prior to any reductions (including the non-Federal share reduction).

The Applicant is not required to obtain and maintain insurance on facilities with less than $5,000 in eligible costs (prior to any reductions).221

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

• The required insurance is not reasonably available,

• An alternative to the insurance requirement provides adequate protection against future loss to the property, or

• The required insurance is not necessary to protect against future loss to the property.

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.222 The State Insurance Commissioner cannot waive Federal insurance requirements, but may certify the types and extent of insurance reasonable to protect against future loss to an insurable facility.223

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.224 In some cases, with FEMA approval, the Applicant may comply with the insurance requirement using a self-insurance plan.225

If the Applicant does not comply with the requirement to obtain and maintain insurance, FEMA will deny or deobligate PA funds from the current disaster.

Insurance Reductions and Impact on Facility Eligibility in Subsequent Disasters

If the Applicant does not maintain the required insurance from a previous disaster, then the facility is not eligible for PA funding in a subsequent disaster, regardless of the hazard(s) that caused the damage.226

When the Applicant receives PA 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 by 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.

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