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An entity which provides insurance is known as an insurer, insurance company, insurance carrier or underwriter. A person or entity who buys insurance is known as an insured or as a policyholder. The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, and usually involves something in which the insured has an insurable interest established by ownership, possession, or pre-existing relationship.

The intent was to reduce future flood damage through community floodplain management ordinances and provide protection for property owners against potential losses through an insurance mechanism that requires a premium to be paid for the protection. In 2003, the GAO found that repetitive-loss properties cost the program about $200 million annually.^[5]Congress originally intended that operating expenses and flood insurance claims be paid for through the premiums collected for flood insurance policies.^[6] NFIP borrows from the U.S. Treasury for times when losses are heavy, and these loans are paid back with interest.

Between 1978 and year-end 2014, the U.S. federal government has paid more than $51 billion in claims under the National Flood Insurance Program.^[7]

Homeowner’s policy is a multiple-line insurance policy, meaning that it includes both insurance and liability coverage, with an indivisible premium, meaning that a single premium is paid for all risks. This means that it covers both damage to one’s property and liability for any injuries and property damage caused by the owner or members of his/her family to other people. It may also include damage caused by household pets. The U.S. uses standardized policy forms that divide coverage into several categories. Coverage limits are typically provided as a percentage of the primary Coverage A, which is coverage for the main dwelling