Flood Insurance Program Receives 30-Day Short-Term Extension
Flood insurance coverage has been extended for policyholders for just 30 days, as lawmakers continue their battle to determine what’s best for the ailing national program. Many lawmakers believe that the program should no longer exist, while others say making adjustments like allowing private home insurance companiesÂ to enter the marketÂ will help it regain strength.
Flood Insurance Program Extended to June 30
Last week, the National Flood Insurance Program (NFIP)Â received a short-term extension to avoid losing authorization on May 31, which would leave policyholders without the ability to make claims if their homes suffered flood damage.
The House of Representatives approved a 30-day extension with a 402-18 vote. As a result, the program will now remain active until June 30, before which lawmakers will be forced to make another decision on how the NFIP should be managed.
The program got its start in 1968 under Congressional authority as a component of the Federal Emergency Management Agency (FEMA). Currently,Â it is the only program that authorizes the issuance of flood insurance.
Private Home Insurance Companies May Enter Market
Though only the NFIP has the authority to write flood insurance policies, private home insurance companies sign on to distribute coverage to consumers. According to newly proposed rules under the 30-day extension, lawmakers are considering allowing private insurance companies to officially enter the market.
This portion of the bill is controversial, however, because homeowners in Louisiana and Mississippi have complained that private property insurance carriers categorized wind damage caused by hurricanes Katrina and Rita as water damage to avoid paying home insurance claims.
Members of Congress, however, say that allowing private insurers to enter the market could reduce costs to taxpayers since the program currently is more than $17 billion in debt to the nation.
Other lawmakers have proposed eliminating the program altogether, stating that it should be completely managed by private insurers like other forms of coverage.
Congress will be forced to face the issue in the coming weeks as they review other reform proposals likeÂ reducing taxpayer subsidies. If they can come to agree on how the program should be managed, they may be able to pass a long-term extension by the end of June.