A bipartisan group of 41 senators are sponsoring a long-term flood insurance bill, with the hope of passing it either this month or as soon as possible when the Senate returns from their President’s Day break. Long-term flood insurance is important to homeowners in flood prone areas because standard homeowners insurance doesn’t cover flooding.
The National Flood Insurance Program (NFIP) is set to expire at the end of May this year. Since 2008, the program has been extended only for short periods of time. The program expired four times in 2010, resulting in a lapse of coverage and negatively affecting many homeowners. According to the Senators sponsoring the bill, “It has been estimated that those program lapses resulted in the delay or cancellation of more than 1,400 home closings per day, further damaging an already fragile housing market.”
House Has Already Approved Long-Term NFIP Bill
While the House approved a long-term flood insurance program last July, the Senate has yet to move on a bill approved by the Senate Banking Committee. The House voted to extend the NFIP until September 30, 2016.
The NFIP is nearly $18 billion in debt, and the House bill would require the phasing in of actuarially sound rates for flood insurance policies, and phasing out taxpayer subsidized rates. Just 1 percent of the claims brought under the NFIP come from 40 percent of the policyholders, a sign to the House that the NFIP was not pricing risk appropriately. In the final version passed by the House, this change was expected to raise $4.9 billion over 10 years, allowing the program to start paying down this debt.
Overview of the National Flood Insurance Program
In 1968, Congress created the National Flood Insurance Program (NFIP) to help provide a means for property owners to financially protect themselves. The NFIP offers flood insurance to homeowners, renters, and business owners if their community participates in the NFIP. Participating communities agree to adopt and enforce ordinances that meet or exceed FEMA requirements to reduce the risk of flooding.