Flood insurance premiums in the United States are set to spike on April 1. Those with coverage through the National Flood Insurance Program (NFIP) will see higher rates as the program continues to recover from its massive $24 billion debt. Much of the debt came in the wake of Hurricane Katrina and Hurricane Sandy. These two disasters caused significant financial damage, which NFIP has been unable to recover from despite action taken by Congress.
Consumers believe higher rates may be unfair considering the lack of flood disasters and NFIP’s growing debt problems
For many living in high-risk flood zones, NFIP is the only place they can find flood protection. Rates on this coverage are set to grow by an average of 10%, which may make coverage too expensive for some homeowners. In these cases, consumers may abandon their flood protection, if they are able to do so under the terms of their mortgage agreements. Many consumers that will be affected by higher premiums consider the hike “unfair,” especially those living in high-risk areas that have not experienced any significant flooding for years.
FEMA continues to resolve the financial problems faced by NFIP
NFIP is managed by FEMA, which has been working to replenish the program’s capital reserves. This has proven difficult, however, even with the aid of Congress. Federal lawmakers have passed laws that call for NFIP to raise premiums on coverage, but they have also instituted provisions that slow the growth of premiums by a considerable degree. These laws have done little to dent the $24 billion debt that the program has accrued.
Flood protection continues to cause controversy throughout the country
Flood insurance has been a controversial in the United States for some time. Consumer advocacy groups have questioned whether or not the program is able to adequately pay claims in the wake of a flood disaster. This issue was highlighted in the wake of Hurricane Sandy, where many homeowners had to wait for claims to be resolved for more than a year after the disaster struck.
