A Look Inside the National Flood Insurance Program

Posted in Home Insurance

April 27th, 2010

Youve probably heard a lot about the National Flood Insurance Program in light of the extensions it has been granted over the past year. However, recently the program expired again because Senate failed to grant another temporary extension before it recessed for Easter break.

Because of all of the changes the program has undergone, people have started asking questions about the program as a whole. So to address this, lets take a closer look at the flood insurance program.

What is the National Flood Insurance Program?

The National Flood Insurance Program (NFIP) was created and is managed by the Mitigation Directorate, which is a component of the Federal Emergency Management Agency (FEMA). There are three components the NFIP:

• Flood insurance
• Floodplain management
• Flood hazard mapping

The idea of the program is to enforce floodplain management ordinances to reduce future flood damage. In order to do this, the program creates floodplain maps that determine whether homeowners live in high-risk areas. If they do, it may be recommended that they make adjustments to their homes to avoid flood damage. Also, it may be required that they purchase Federally-backed flood insurance.

The floodplain maps change for time to time and have recently been adjusted. So its good to check your area to see at what risk level your home sit in.

Past, Present and Future of NFIP

U.S. Congress created the NFIP in 1968 as a way to provide a way to reduce the escalating costs associated with repairing damaged buildings caused by floods. Currently, homeowners policies do not cover damage caused by floods, which means if you dont have flood insurance, structural and personal property losses caused by floods may not be covered by flood insurance policies.

While the future of NFIP is solid, it hasnt looked this way over the past year because the program has repeated expired and had to be extended. The reasons for the extensions, however, are not because the integrity of the program is question.

Senate, in particular, has been questioning whether to expand flood coverage so that it also includes windstorms like tornados and hurricanes, which are also not covered by homeowners policies because they are regional issues vs. national issues.

Where to Purchase NFIP-Backed Flood Insurance

For the past few weeks, flood insurance hasnt been available because Senate failed to extend the program after its expiration date came and went on March 28, 2010. The reason for the failed extension was that lawmakers were working to include windstorms into the coverage, yet recessed for Easter break before it could happen.

In the meantime, some homeowners have not been able to purchase or renew their flood insurance. However, when it does come available again, you will be able to purchase coverage from your private homeowners insurance company.

As for cost, flood insurance prices vary depending on the area. Of course, you could shop around to make sure youre not paying more than you desire for coverage. But more than anything, its good to consider purchasing it because if a flood strikes your dwelling or business and youre not covered, you may have to come out of thousands of dollars to repair the damage.