Flooding is the most common and costly natural disaster to affect every state across the country. Flooding is so common, in fact, that Congress authorized the creation of the National Flood Insurance Program, under the Federal Emergency Management Agency, to lessen the financial impact of flood disasters on individuals, business, and all levels of government. That authorization is set to expire next month, on May 31, and only Congress can provide the authority for continued funding of the program.
If Congress fails to reauthorize the NFIP beyond May 31, many individuals, families, businesses and local communities will find themselves left vulnerable to the devastating effects of flooding, because, the NFIP will be unable to issue new policies, renew existing policies, or increase coverage on existing policies.
Here are a few examples of how this can impact you:
- If you are a property owner in a high risk flood area, who would normally be required to purchase flood insurance in order to purchase your home, you would be unable to obtain affordable flood insurance. The National Association of REALTORS estimates that a lapse in authorization jeopardizes an estimated 1,300 sales each day, or about 40,000 mortgage closings per month.
If you have an existing policy and continue paying your premiums, you can file a claim for flood-related damages and it will be processed. Claims for new policies, or policy renewals, where the policies were received and held by your insurance company during the lapse will not be paid until Congress reauthorizes the NFIP. In this instance, your insurance company can still investigate your claim under a “non-waiver” agreement, up to the point of payment. Under a “non-waiver” agreement, your insurance company may not pay your claim if Congress does not reauthorize the NFIP to pay claims during the period of lapse.
- In addition, if the NFIP experiences a lapse in authorization, the cash flow into the program from premiums will diminish, and the NFIP may have to halt payment of your claim if you have recently experienced flooding.
- If you are a homeowner, renter, or business owner and you are unable to purchase NFIP flood insurance, or renew your existing policies, and are impacted by flooding, you may need to look to the services and recovery support provided by voluntary and faith based organizations, state and local governments, and possibly even to federal assistance programs in their recovery, such as the Small Business Administration, who can offer low interest loans, or FEMA’s Individuals and Households program, which can provided very limited assistance in the form of grants.
The NFIP identifies areas of flood risk; it encourages communities to implement measures to mitigate against the risk of flood loss; and it provides financial assistance to help individuals recover rapidly from flooding disasters. However, in recent years, a series of short-term reauthorizations and temporary suspensions of the NFIP have eroded confidence in the program among citizens and stakeholders, including state governments, tribal governments, local communities, individual policyholders, mortgage lenders, and the private insurance industry. To the individuals and business owners who live in an area with flood risk, have an upcoming mortgage closing that requires the purchase of flood insurance, and you need affordable flood insurance coverage, we urge you to apply for flood insurance immediately. It many instances, it takes 30 days for a flood insurance policy to take effect, and it must occur while the program is authorized.