Is real, meaningful flood insurance reform actually going to happen?
In the past year, and actually for quite some time, Congress has extended flood insurance coverage minimally, with one band-aid after another instead of simply reforming the system and shoring it up for the long-term. Instead, they're sandbagging it.
Forty-one U.S. senators from both parties have signed a letter urging the Senate to schedule a vote on legislation to reform and extend the federal flood insurance program "as expeditiously as possible in February or very soon thereafter, before the spring and flood season begins."
U.S. Sen. David Vitter, R-La., and Jon Tester, D-Mont., sent the letter to Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell urging them to bring legislation to fully extend the National Flood Insurance Program (NFIP) to the floor for debate and passage.
The NFIP is currently set to expire on May 31, 2012. The proposed legislation would extend it for five years and initiate financial reforms of the debt-ridden program.
The House of Representatives passed its version of a long-term reauthorization on July 12, by a vote of 406-22. With such a wide margin in the lower house, you'd think there would also be clear majority in the Senate.
“We believe that passage of a comprehensive, bipartisan flood reauthorization bill is within reach, and we respectfully urge you to schedule such a debate,” said the letter from the 41 senators.
Since 2008, the NFIP has been extended through a series of short-term measures. The program expired four times in 2010 resulting in lapses totaling 53 days leaving many vulnerable without comprehensive homeowner's insurance. Those program lapses resulted in the delay or cancellation of more than 1,400 home closings per day, further damaging an already fragile housing market, according to Tester and Vitter.
"It would be a huge disservice to homebuyers to allow the NFIP to lapse again, as Congress allowed it to do four times for a total of 53 days last year,” Vitter said. "Each time the NFIP approaches its expiration date it causes a great deal of turmoil in the housing market because of the uncertainty surrounding the program, and we can easily prevent this from happening. Our bill has broad bipartisan support and is certainly within reach of passing the Senate."
While flood insurance is not mandatory for homeowners outside of a high-risk area, anyone can be financially vulnerable to floods. In fact, people outside of high-risk areas file more than 25% of NFIP claims and receive one-third of disaster assistance for flooding. Residential and commercial property owners who are not located in high-risk areas should ask their agents if they are eligible for the Preferred Risk Policy, which provides affordable flood insurance protection, starting as low as $129 a year.
More Myths and Facts About Flood Insurance
These are from Insurance News Net:
Myth: If you live in the "100-year floodplain," that means there is only going to be one big flood every 100 years. You don't really need insurance, since the flood risk is relatively small.
Fact: The term "100-year floodplain" means that every single year there is a 1-in-100 chance of a flood. NFIP now calls areas where flooding is most likely to occur "Special Flood Hazard Areas."
Myth: You can't buy flood insurance if you are located in a high risk flood area.
Fact: Anyone can buy flood insurance through the NFIP no matter where you live, as long as your community participates in the NFIP.
Myth: You can buy flood insurance immediately before or during a flood.
Fact: If there is a flood already in progress, you can't buy flood insurance. In most cases, there is a 30-day waiting period after you've applied and paid the premium before the policy is effective.
