Flood insurance premiums to spike for homeowners due to new legislation

Flood Insurance and reinsurance

Flood-Insurance

Senate debating legislation that would raise flood insurance rates through NFIP

Those living in areas of the U.S. that are prone to floods may soon see a spike in their insurance premiums due to a new legislation currently being debated in the U.S. Senate. The legislations concerns the beleaguered National Flood Insurance Program (NFIP). For years, the program has been a source of affordable insurance coverage for homeowners in risk-prone areas of the country. This affordability has come at a cost for the program itself, however, which has taken the form of financial failure. Federal lawmakers have been struggling to find a solution to the problems facing NFIP for years, but have been unsuccessful thus far.

Lawmakers begin to find solutions to NFIP problems

NFIP is currently some $18 billion in debt to the federal government, the majority of which was borrowed from the U.S. Treasury Department to manage the claims generated by the 2005 hurricane season. Because flood insurance is mandatory in some parts of the country and the fact that many insurance companies are unwilling to write policies in high risk areas, NFIP has become the largest provider of flood insurance in the country. Financial problems are threatening to put an end to the program, however, which could leave millions of people without the flood insurance coverage they need.

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440,000 policyholders expected to be effected by legislation

The legislation being debated by the Senate would more than double the flood insurance rates for some 440,000 policyholders receiving coverage through NFIP. This is meant to help alleviate some of the financial problems crippling the program by targeting policyholders that receive subsidized rates. According to the Congressional Budget Office, the legislation would save more than $4.7 billion by 2021 and may bring NFIP away from the brink of collapse.

Higher flood insurance rates could be too much for some consumers to handle

Many lawmakers have shown support for the legislation, but not without expressing their concerns. Some argue that higher premiums will put undue financial stress on consumers who may not be able to bear the additional burden. For these consumers, flood insurance is likely not an option as it could be required as a term for their mortgage.

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