Understanding Substantial Damage Determination

A house on a suburban street is raised off its foundation.

After a flood event, homeowners often struggle to understand the requirements and procedures of the National Flood Insurance Program (NFIP), presenting unexpected challenges in an already dire situation. Homeowners must have a clear understanding of the intricate processes of the NFIP, particularly the concept of substantial damage, to determine what actions will need to be taken throughout the recovery process.

“Understanding the details about substantial damage is the single most important recommendation I can make to community leaders. It is one thing to read about NFIP rules in advance,” says IBTS Floodplain Manager and GIS Analyst Kathi Cowen. “It’s another thing to put these rules into action by making thousands of decisions under duress.”

Substantial Damage Determination

Local officials determine that a home has been substantially damaged when the repair estimate for a flood-damaged home is 50 percent or greater of its market value. It is important to note that the determination must be based on a market value appraisal, as opposed to a much lower assessed amount for tax purposes. Additionally, homeowners must be careful not to mix elective remodeling construction with flood-related repairs. If the remodeling expenses are mixed in with damage repairs, the dollar amount will count towards the substantial damage determination.

To receive NFIP funding, homeowners are required to prove that their homes were not substantially damaged by presenting contracts showing the cost to repair is under 50 percent of their home’s value. The two key variables are the damage estimate and the appraisal of the home’s value.

If a home is determined to have sustained substantial damage, however, homeowners may need to elevate their house to the height mandated by local officials, move the house out of the floodplain, or demolish the house altogether.


Who Should be Concerned About Substantial Damage?


Homeowners with property located inside Special Flood Hazard Areas (SFHA), who are required to have flood insurance.

Understanding NFIP Requirements

“All people want to know is ‘can I rebuild my house?’” recalls David Ratcliff, IBTS Program Director for the City of Central, Louisiana. “This is the most vital, overwhelming question on people’s minds.”

After a flood, ensuring staff and homeowners understand the requirements and procedures of the NFIP could present some new challenges for localities. It is important that homeowners in Special Flood Hazard Areas (SFHA) are aware of the three required actions for their property: raise, relocate, or demolish. Staff should not give details to the community on NFIP until they are certain that they understand the requirements and process.

“Homeowners can get penalized for a damage assessment conducted by a private insurance representative if it is incompatible with NFIP guidelines.” explains Cowen.

Immediately following a disaster, homeowners may begin requesting damage assessments from their private homeowner’s insurance companies, who in turn quickly send homeowners checks for the damage. While this may be a welcome relief at first, homeowners would soon discover that FEMA actually evaluates insurance payments for over half the property’s value as defining the house to be substantially damaged. It is best to wait until all assessments have been made and the NFIP and FEMA have allocated funds before conducting home repairs.

While the rules and procedures for the NFIP can often be challenging for communities and their residents, the benefits far outweigh any concerns. The NFIP allows homeowners in participating communities to purchase flood insurance from their private insurance company at affordable rates. These rates are a mere fraction of the cost that it takes to repair uninsured homes damaged by a flood. With a full understanding of the NFIP and substantial damage determinations, homeowners are able to more easily access the necessary funds to rebuild their homes.

For more information on substantial damage determination, or to view more natural disaster-related tips, please visit: