The National Flood Insurance Program, or NFIP, was already in deep debt, to the tune of $24.6 billion, before Hurricanes Harvey, Irma, and Maria, and Tropical Storm Nate hit our shores. Further complicating matters, the Congressional Budget Office, or CBO, is projecting a budgetary shortfall of $1.4 billion. Let’s examine what’s causing the budgetary shortfall and what the future implications are for the flood insurance program.
Many people refer to a major water leak as flooding. Insurance, however, defines flooding, or a flood as rising water caused by rivers, lakes & streams overflowing their banks, rising water from heavy rains, or tidal surge which enters the home. This type of water damage isn’t covered by your home insurance policy, it’s only covered by flood insurance.
In August a slow moving unnamed storm system settled over Louisiana dumping up to 31.39 inches of rain over 72 hours resulting in a 1,000 year rain. Massive flooding occurred affecting 188,729 homes and 507,495 people, of which 60,000 were damaged by flood waters. It’s estimated that 78% of the homes damaged by flood waters did not have flood insurance.
One of my Houston clients called me in April. It was the morning after they’d been evacuated by boat from their home in the middle of the night as north west Houston flooded. The water eventually reached 10 feet deep in the street and topped out about 2 plus feet on the first floor of her and her husband’s home. I used that conversation to review the preparations she and her husband made in advance of the floodwaters and outline a plan of what to do when the water receded. They good news is they have flood insurance!
When a massive amount of rain falls in a short period of time, flooding is inevitable. After seeing these two events, I felt it important to revisit flood insurance by answers some of the questions I’m asked by homeowners. Over the next two weeks, I’ll also answer the question of who needs flood insurance and talk about cleaning up after a flood.
The Dallas / Fort Worth area recorded the wettest May on record with 16.97 inches of rain. We also survived the second wettest spring on record with 25.04 inches of rain from March through May. According to the National Weather Service, parts of D/FW have received between 16 and 24 inches over the past 180 days.
I’ve started receiving letters from the National Flood Insurance Program, or NFIP, for my residential clients with flood insurance policies on their homes. These letters are being sent to all flood insurance policy holders prior to their renewal as a result of the Homeowner Flood Insurance Affordability Act, or HFIAA, of 2014. The letter notifies flood insurance policyholders of a surcharge which will be added to their upcoming renewal.
Flood insurance popped up on the national news feeds in late March of this year. The Biggert-Waters Flood Reform Act of 2012 (BW-12) went into effect in October of 2013 impacting home and business owners along coastal areas of the Gulf of Mexico and Atlantic Ocean, as well as in the Missouri River Basin (see http://50.87.248.161/~wiseinsu/flood-insurance-reform-act-of-2012/).
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