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By Vermel Thomas

Is flood insurance now affordable for everyone?

Flood disaster and flood insurance

We have seen on TV news and the internet the destruction that flooding has caused in various regions of the United States. The Federal Emergency Management Administration (FEMA), scientists who study climate, and area flood managers suspect that there will be a higher percentage of floods occurring, especially along coastline areas.1

Flooding is considered the world's number one worst disaster. Over the past couple of years, FEMA has considered heavier rainfall due to changes in climate to be the culprit. An executive order from the previous White House Administration now asks the agency to include this information.

FEMA is also proposing new operating procedures that require research into the effects of climate change on flooding. Older models of flood maps for the United States, designating regions where flooding is common, are now changing.

No longer are only coastal zones considered flood zones. Flood zones were once considered an uninsurable risk and coverage was virtually unavailable from the insurance marketplace.

Designated flood plain areas have changed within the past five years due to rainfall levels that are higher than they have ever been. Special Flood Hazard Zones have shifted, and that negatively affects the premiums for flood insurance.

The government's help for homeowners

Coastal regions which have federally backed mortgages (via the VA, FHA, Freddie Mac, home equity loans, etc.) must include flood insurance. The average cost of flood insurance is around $700 annually.

Damage from a flood is not covered under a homeowner's policy. Flood insurance is a detached policy that is backed by the National Flood Insurance Program. The insurance is available for owners of businesses or residential homes.2

Under the previous Administration, there were new flood insurance reforms aimed at making flood insurance more affordable and organizationally sound. The Homeowners Flood Insurance Affordability Act of 2014 and the Biggert-Waters Flood Insurance Reform Act were enacted into law.

These regulatory reforms are designed to keep premiums affordable for everyone, prevent future rate increases, implement a surcharge on all policyholders, and repeal any rate increase that had recently gone into effect and provide refunds to those policyholders.

The present Administration does not support many of the previous Administration's programs, including flood insurance. The current National Flood Insurance Program is set to expire on September 30, 2017, and Congress will consider changes and hopefully positive improvements.

It is rumored that Congress would like to keep parity between financial solvency of the present program, reducing taxpayer responsibilities, and strengthening the overall flood insurance program.

FEMA and the future of flood insurance

The National Flood Insurance Program is a federally sponsored insurance program, whose oversight belongs to the Federal Emergency Management Administration. There are three components to its operations, consisting of flood insurance, management of flood-prone areas, and the development of flood hazard mapped areas in the United States.

The flood insurance administrators and state insurance regulators do back a long-term reauthorization program (minimum of ten years). The future of flood insurance is to support short-term extensions and prevent program lapses that negatively impact both the insurance and the housing markets.

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