What’s In the New Flood Insurance Bill?

There’s no doubt that the National Flood Insurance Program has had its share of ups and downs. Over the course of the last year, the program has expired and been extended numerous times. After its last extension, lawmakers decided that it was time to create legislation that would last for years and put an end to policyholders continuously losing their coverage.

The result was HR5114, also known as the Flood Insurance Reform Priorities Act of 2010. This bill is hopefully Congress’ last ditch effort to get the NFIP under control. To understand more about how HR5114 could affect those currently holding flood insurance policies, let’s take a closer look at what’s inside the bill.

A Look Inside HR5114

So what changes could take place as a result of the new bill? Well first, the bill would reauthorize the program, which is now set to expire September 30, so it would not require any new renewals for five years—or the end of 2015. This would be a great help to current policyholders who saw their coverage lapse repeatedly, only to be unable to make claims when flood damage affected their homes.

Here are some other adjustments the bill would make:

  • Increased NFIP limits: The bill proposes that coverage limits for both residential and commercial properties be increased from its current limits, which is something that hasn’t changed since 1994.
  • Premium increases limited: The bill would limit the premium increases of non-residential, non-primary residences to 20 percent annually until the risk-based, actuarially sound rate is reached.
  • Gett rid of premium subsidies: Currently, there are subsidies available for properties built prior to 1974. Those would be phased out in the bill.
  • Additional living coverage limited: Language has been included in the bill that would limit coverage to $1,000 for additional living expenses on residential properties. However, you would be able to purchase additional amounts.

A major aspect of the bill that affects those who have recently found that the new flood map created after the Federal Emergency Management Agency (FEMA) developed new flood zones would require them to purchase flood insurance, is purchasing coverage won’t be mandatory for five years.

Adding Wind Coverage to NFIP

In addition to making significant adjustments to NFIP, some lawmakers have considered adding windstorm coverage to the program. This addition was authored by Rep. Gene Taylor (D-Miss.) and would work to remove pressure from state wind insurance pools that have trouble dishing out money to cover claims.

However, there have been many opponents to this bill, including environmental groups, taxpayer watchdogs, consumer advocates, the business community and even the Obama administration who all say that the addition has only been authored to give more money to specific insurers while taking away from those that already offer coverage.

As of August 3, 2010, the House had managed to avoid voting on the addition to the bill before they left for their month-long August break. At the time, there was also a separate bill introduced in the Senate that would seek to address the wind coverage issue by having the wind insurance company and flood insurance program each pay the policyholder 50 percent of a claim.

There is no set deadline as to when the new bill will make its way through Congress. However, everyone hopes that this will occur before NFIP expires at the end of September.