Understanding flood insurance in the US

Flood homeowners Insurance Program
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Flood protection is a problematic issue

Flood insurance has become a strange subject in the U.S. Many homeowners are unaware of flood protection, but for those living in coastal regions of the country this protection is mandatory. Private insurers do not typically offer flood protection because of the costly nature of natural disasters and how often these disasters can cause floods in certain parts of the country. As such, the only place that most homeowners can find flood protection is through the National Flood Insurance Program. Receiving protection from this federal program is not a simple matter, however, and the program itself has managed to acquire a degree of infamy.Flood Insurance Program

The National Flood Insurance Program was designed to make flood protection more available to homeowners than it had been in the past. The program, however, has suffered from numerous disasters over the past several years. These disasters are not always natural in origin as some have been spurred by problematic legislation. Natural disasters have, however, done the most financial damage to the federal program over the past few years. Currently, the federal program is $28 billion in debt. Since 2008, the program has received stopgap extensions from the federal government 18 times and has been shut down twice due to financial instability.

Federal law attempts to rectify problems, but creates some of its own

In order to solve the problems the federal program was facing, the Biggert-Waters Flood Insurance Reform Act was instituted. On July 6, 2012, the legislation was signed into law and some of its provisions became active. The legislation was meant to ensure that the federal National Flood Insurance Program survived so that homeowners would not have to find coverage through the private market. The legislation was designed to solve the financial problems of the federal program by raising money through its various provisions. The problem, however, is that raising this money comes from raising rates for flood protection, forcing businesses and homeowners to pay more for coverage that is already quite expensive.

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While the Biggert-Waters legislation aims to solve problems, it is creating new ones that may be difficult for homeowners and businesses to overcome. The law allows for flood insurance rates to be increased significantly and, in some cases, rates are going from $3,000 a year to over $30,000 a year. The law also tasks the Federal Emergency Management Agency, which oversees the National Flood Insurance Program, with revising its flood maps. These flood maps are used to identify regions throughout the U.S. that are exposed to significant flood risks. FEMA has been revising these maps and including regions of the U.S. that had, in the past, not been classified as susceptible to flood risks. As flood maps are expanded, insurance rates are growing at a rapid rate.

Moreover, the Biggert-Waters law has done little to actually reduce the federal flood program’s deficit. This deficit can make it difficult, if not impossible, for homeowners and businesses to have their claims paid in the event of flood damage. Because the federal program cannot handle the onslaught of claims associated with natural disasters, claimants must either wait for the program to issue emergency funds or wait for government officials to issue such funds.

editors choiceFlood insurance is considered a safety net for property owners in the U.S., but several federal lawmakers consider the Biggert-Waters law to be a failure. Some lawmakers suggest that the National Flood Insurance Program itself is too flawed to be salvaged. The federal government is currently working to resolve the law’s issues as well as those affecting the federal insurance program, but finding solutions to these problems has proven to be difficult.

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