National Flood Insurance Program Finally Extended for an Entire Year

Homeowners holding flood insurance policies must be celebrating nationwide with the news that the National Flood Insurance Program was extended for one year. After months of expirations and short-term extensions, the U.S. Senate finally caved to pressure from insurers and gave the program a long-term extension.

NFIP Extended to Sept. 30, 2011

After a series of one- to three-month extensions of the National Flood Insurance Program, some of which actually being allowed to expire for days or weeks at a time, the U.S. Senate finally agreed to give the program a longer extension until lawmakers could decide how they want to handle key issues.

This long-term extension resulted from strong urging of companies carrying flood insurance that wanted lawmakers to make a decision on the program before it expired on Sept. 30, 2010.

One reason that the program has not been extended for five years, as originally intended, is because Congress is still deciding whether to add windstorm coverage. This is not the only problem that the program is facing, however. The NFIP is in the red, which has resulted in some private insurers pulling out of the program because claims payouts were not being reimbursed.

These issues all must be dealt with before the program can see a more permanent extension.

Why Extension is Important

While Congress is in the process of deciding how to handle the program, policyholders need protection for their homes in case of flooding. Whenever the program is in an expiration phase, homeowners not only cannot purchase coverage, they cannot file claims under existing policies.

This leaves them in the vulnerable position of having to wait until the program gets started again to make claims. During this time, they may have to pay for expenses out-of-pocket or even find temporary housing to avoid the damage to their homes.

While lawmakers in the House of Representatives still need to approve the extension before it is official, many expect it to pass with ease. If not, 5.5 million flood insurance policyholders will be left without coverage after Sept. 30.