National Flood Insurance Program Gets Extension
Last week, Congress approved a five-year extension for the seriously strained National Flood Insurance Program (NFIP). The NFIP had suffered in recent years due to a large number of claims filed in the wake of record severe weather across much of the country. Failure to renew would have meant that many potential homeowners in flood-prone locations would find themselves unable to close on loans or refinance their mortgages. The bill includes a provision that enlists the National Oceanic and Atmospheric Administration to assess the nature of hurricane damage.
The NFIP was created in 1968 because so few private insurance companies were offering flood damage coverage for residential structures. The program provides federally funded insurance policies at additional premiums, with member communities agreeing to work towards reducing the flood risk in their area. Many homeowners in flood-prone areas are required to provide proof of flood insurance protection.
Unfortunately, too many homeowners overlook the insurance option in favor of relying on federal disaster aid in the event of a serious flood. The problem here is that federal aid is only available if the area in question is considered a disaster area, and such aid is also provided in the form of low-interest loans that have to be paid back. Obviously, the preferred option should always be consistent insurance coverage for nominal premiums, as it cuts down on the governmental red tape.
In recent years, the NFIP had become strained due to record severe weather, and Congress had been looking for any and all available options for extending the program and its benefits, continuing to provide coverage for at-risk homeowners.
Homeowners who are interested in joining the program should first make sure their neighborhood participates in the NFIP, and then check with local insurance providers to see if they are licensed agents for the program. Failing that, government offices should be contacted in order to secure the proper coverage.
Increased demand for flood coverage has been due to a number of factors:
Flood insurance is required in many flood-prone areas in order to secure a loan. This makes it very likely that flood-prone areas will be purchased by seniors who have paid off mortgages, or companies that acquire the property for rental purposes.
Flood insurance covers losses for the owner of the property, and many of the claims are subject to caps. This usually results in the property being utilized by renters rather than property owners.
Flood-prone areas are usually put up for rent because the owners don’t wish to undertake risks by occupying the property themselves.
Flood-prone areas also are many times offered for rent at a discount, and this attracts lower income groups.