Flood Insurance and the National Flood Insurance Program

With what promises to be a winter of record-breaking snowfall we can look forward to a big thaw and the potential for major floods. Even if you don’t live in areas that get a lot of snow, heavy winter and spring rains can put you at risk.  Flooding occurs in all 50 U.S. states and 25 percent of all floods happen in low-to-moderate risk areas, according to research by the National Flood Insurance Program (NFIP). Now is a good time to buy or beef up your flood insurance.

Flood insurance is not part of your standard homeowners insurance policy. It’s an additional purchase. By the way, you don’t need to own a home to protect yourself from flood damage. Renters insurance that includes flood insurance is available to cover personal property loss. Either way, the Internet is a good place to start looking for competitive flood insurance quotes.

Don’t put off the purchase. Many flood insurance policies have a 30-day waiting policy before coverage kicks in.

If you live in a high-risk area and have a mortgage held by a federally regulated lender, flood insurance is a mandate. In 1968, Congress passed the National Flood Insurance Act, creating NFIP in the process. Initially it was a voluntary program designed to make flood insurance available in participating communities. However, in 1973 Congress passed the Flood Disaster Protection Act which made it a mandatory purchase for certain aforementioned mortgage holders. By 1982, the Coastal Barrier Resources Act (CBRA, not to be confused with health care’s COBRA) amended the law again.  CBRA made federal flood insurance unavailable for certain new or greatly improved structures within the boundaries of a set of coastal maps.  In 2004, the Flood Insurance Reform Act sought to further American taxpayers by “redcucing losses to properties for which repetitive flood insurance claim payments have been made.”

The intention of NFIP was to offer flood victims with disaster assistance because of the high rate of residential and commercial development in high-risk areas. NFIP’s critics claim it has had the opposite affect.  The understandable reluctance of insurance companies to write coverage for homes in flood-prone areas discouraged people from building there. But with both disaster aid and insurance payments available under the federal program, there is less of a disincentive, with a consequent rise in property damage and lives lost due to floods.


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