Important Flood Insurance News

[JenBayles]

Many people who do not live in flood-prone areas are unaware of the importance of purchasing flood insurance for their homes and businesses. Even if you do not live in a flood plain, you stand to lose everything in a flood disaster. A homeowner's insurance policy does not cover flood losses. As we have all seen following flood losses to hurricanes Katrina, Rita and Ike (among others), working with FEMA for a low-interest loan is a dicey proposition at best. Should you eventually receive such a loan, remember it is just that: a loan that must be paid back. Essentially, it is a second mortgage on your property.

The only entity from whom flood insurance can be purchased is FEMA, which administers the National Flood Insurance Program (NFIP) under the umbrella of the Department of Homeland Security. These policies can be purchased from your homeowner's insurance company, but they merely admister the individual policies. Since private insurers have little invested in the program, this coverage is rarely advertised when you purchase a home.

If you're like most people, you celebrate the fact that your property is not in a floodplain and don't bother to buy a flood insurance policy. The average rate for most homeowners outside a floodplain is about $300 a year. That basic policy will barely cover the costs of rebuilding your home and offers very little in the way of contents coverage. Rather than buying coverage for the sales or market value of your home, you need to insure for what it would cost to rebuild it from the foundation up. How many homes have we seen in news stories where nothing was left? How much would it cost to build your exact home today? That's the number you're looking at and it's usually much higher than the purchase price of your home.

On Friday, February 26, 2010 renewal of the NFIP, attached to bill HR 4691 was working its way through the United States Senate. This was the bill authorizing increased unemployment benefits. Because nothing in the bill was funded, Sen. Benning of Kentucky held up its passage citing the Senate's own PAYGO rules. This resulted in the NFIP not being able to sell new flood policies or act on current claims. The program no longer existed.

On March 3, 2010, the President signed HR 4691 after Senator Bunning removed his objections to the bill under pressure from both parties. However, it is not time to celebrate. The NFIP was only reauthorized for a one month extension and will have to be reauthorized again in early April.

This is a frightening situation for anyone who lives in or near a floodplain. Flood insurance does not exist through private insurers leaving us at the at the mercy of Congress to keep the Federal program in place. Keep an eye on the news - and Congress. It would be great if everyone contacted their Senator and Congressional representative to ask for a permanent solution to keep the NFIP in place without breaks in coverage.

[vbhoutex]

This is very disturbing news,especially for someone like me who lives near a floodplain and does have flood insurance. Lot of good that does me if they won't even pay a claim if I have one!! Time to call our congressional reps and senators!!! I have to stop so I don't start bashing!!!

[jasons2k]

When we moved here in 2005, luckily our realtor warned us to buy flood insurance even though we do not live in the flood plain. So we carry a separate flood policy as extra insurance.

As storms like Allison showed (and the rains that dumped on the Bear Creek area), severe rains can cause sheet flooding regardless of the flood plain map.

The part of this article that disturbs me is why was the NFIP provision attached to an unemployment bill in the first place? That's part of what's wrong with Congress - lumping unrelated legislation into "parent bills" to get them voted through. The problem, as we see here, is that the reverse can happen if it's not passed.

Why can't they create an NFIP funding bill and call it just that, and then vote on it seperately? It's maddening.

[JenBayles]

I totally agree with your assessment jason. It would make too much sense to debate a separate bill on its own merits. <sigh> We'll have to keep an eye on the NFIP issue very soon since it only got a one month extension.

I'm currently involved in selling my mother's home since she's now in a nursing home. The realtor got quite the education on flood insurance from me, and luckily he really listened. Typical of most realtors, he hasn't pushed the issue with his buyers if the FEMA maps show the property isn't in a floodplain. Hopefully he will begin making a more forceful case for its purchase and spread the word amongst his colleagues.