T IDALBAS INGROUP.COM 5 Substantial Damage Under FEMA’s National Flood Insurance Program (NFIP) For structures that are in a Special Flood Hazard Area (SFHA), another consideration will be whether the damages constitute substantial damage: Substantial damage means damage of any origin sustained by a structure whereby the cost of restoring the structure to its before-damaged condition would equal or exceed 50 percent of the market value of the structure before the damage occurred.3 A floodplain manager’s Substantial Damage determination is part of the NFIP eligibility process and is separate and distinct from the PA eligibility process for determining whether a facility is eligible for replacement or relocation. If a structure meets this definition, then it must be flood-proofed to or above the Base Flood Elevation (BFE) and meet other applicable NFIP requirements. The importance of such a determination goes back to the previous discussions regarding repair versus replacement: “In short, if a facility does not meet the 50 Percent Rule, in cases of substantial damage, replacement might still be the most cost-effective option.”
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