Flood Insurance is a necessity for many homeowners nationwide, especially in the 22,000 communities where it is required for a mortgage. The National Flood Insurance Program (NFIP) has approximately 2.5 million policies across the U.S. covering single family homes, but the program is currently set to expire on December 8, 2017. The Pikes Peak Association of REALTORS® (PPAR) and National Association of REALTORS® (NAR) are urging congress to pass a multiyear reauthorization. Without reauthorization, NFIP would not be able to issue or renew policies in those communities where flood insurance is required.
On Tuesday, Nov. 14, the house passed legislation on a five-year reauthorization bill (H.R. 2874), which would extend NFIP to 2022. The extension would bring stability to the program and include several improvements, such as updated federal flood mapping procedures and increased penalties for residents of flood zones without insurance. “We’re hopeful the Senate will now step up to the plate and do their part by passing a flood reform and reauthorization package without delay,” NAR President Elizabeth Mendenhall said in a statement. “REALTORS® know first-hand what happens when the NFIP expires, and it isn’t good for consumers, businesses or our communities.” The Senate vote must occur before the program expires on December 8, 2017 to avoid a lapse, which would cost 40,000 property sales per month. The public is encouraged to call their senators, and urge them to extend the NFIP.
According to The Federal Emergency Management Agency (FEMA), “The National Flood Insurance Program aims to reduce the impact of flooding on private and public structures. It does so by providing affordable insurance to property owners and by encouraging communities to adopt and enforce floodplain management regulations.” Without NFIP, many homeowners or potential homeowners have to seek private flood insurance, which can be difficult or even impossible to obtain. Difficult, because it is so expensive that most would not be able to afford it; and impossible, also due to expense, but additionally because some private companies don’t want to insure on properties that have had repeated flood issues.
“25 percent of flood insurance claims are repeat,” said Randy Reynolds, Director for NAR. “We need to devise a program to help people move from areas prone to flooding, or at least raise the homes on stilts. Another thing is that the current flood maps are so outdated and inaccurate – we need to be using the new mapping technology that is accurate to the foot; as opposed to a few hundred yards, as is the case with the old technology.”
In order for the NFIP to be as cost-effective, catastrophe-avoidant and efficient as possible, the NAR suggested the following:
- Accurate flood maps. Modern mapping technology can produce building-specific risk assessments.
- Property elevation. Elevating a property by two feet can cut flood insurance premiums by as much as two-thirds.
- Risk mitigation. Property owners cannot access mitigation dollars until after the property floods despite it being more cost effective to elevate or relocate beforehand. Addressing the issue before it becomes a catastrophe can reduce the U.S. government flood damage spending of $1.4 billion per year, and can save taxpayers $4 for every $1 spent.
- Private market options. The Flood Insurance Market Parity and Modernization Act can reduce barriers to private flood insurance. Enabling consumers to meet federal requirements with a private plan offers an alternative to overpriced NFIP policies. “There needs to be other opportunities for the private insured to come into the market – but they don’t like to have total risk,” said Reynolds. “The private insurers can provide flood insurance up to a certain amount, and the government can help cover catastrophic events.”
Flood insurance is not exclusive to coastal states. “People have a misconception that because we live in Colorado that flood insurance is not a big deal, but there are flood zones here as well,” said Reynolds. “We’ve seen just in the past few years flooding in Longmont and Manitou Springs – so a lapse in NFIP would affect us locally.”
Long-term reauthorization of the NFIP is critical to current and potential homeowners. Take action today by encouraging your senators to extend NFIP.
To learn more about H.R. 2874, click here: https://amendments-rules.house.gov/amendments/DUFFY_074_xml116170943344334.pdf
To learn more about the Pikes Peak Association of REALTORS®, visit PPAR.com.