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Government's Flood Insurance Program Works

April 5, 2013

Published in the Press of Atlantic City

Exactly four months before Hurricane Sandy came ashore, Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012, with the strong support of the National Association of Realtors®, and in so doing reauthorized the critically important National Flood Insurance Program so homeowners could affordably access flood insurance. In the months since then, many of the state's homeowners with flood insurance have received quotes for significantly higher rates, but Sandy and the new law may not be to blame.

Several factors could have caused homeowners' flood insurance rates to increase. The Federal Emergency Management Agency manages the government's flood program, and as FEMA improves its mapping technology and draws more accurate flood maps, some homes may now be located in a flood zone, or a higher risk zone, where flood insurance is more expensive. Also, in re-evaluating a policy at renewal, some insurance agents may adjust rates to correct previous mistakes made about the home's features, such as a missed crawl space.

It is true, however, that some property owners will eventually see their flood insurance premiums increase as federal rate subsidies are phased out and homeowners begin paying the true actuarial rate associated with living in a flood zone. The gradual phase-out of subsidized rates was included in last year's legislation to preserve critically important flood insurance coverage for homeowners in New Jersey and across the country.

The rate increases have prompted undue criticism of the NFIP. This program has been helping families protect themselves from flood disasters since 1968, when it was created because of the lack of available and affordable flood insurance in the private market. This is still true today, which is why the NFIP remains vital to Americans and the nation's economy.

U.S. Rep. Frank LoBiondo, R-2nd, and the rest of the New Jersey congressional delegation boldly stood up for the citizens of New Jersey by realizing how it important it is to provide affordable flood insurance to the state's residents and helping pass the Biggert-Waters Flood Insurance Reform Act. Before Congress passed that legislation, the program operated under short-term extensions. In the past five years, there were 18 extensions and several lapses in program coverage, delaying or cancelling thousands of real estate transactions daily and wreaking havoc on real estate markets.

Gradually increasing rates was a necessary compromise to preserve coverage and keep the flood insurance program operating for five more years. Without the NFIP, few New Jersey residents would have been able to afford flood insurance, and many would have suffered far greater losses following Hurricane Sandy. It's the same story for millions of more homeowners in 21,000 other communities across the country where flood insurance is required for a mortgage.

Although not every New Jersey homeowner with flood insurance will face higher premiums this year, some of them could, and more may in the future. While higher rates may place a greater burden on families, they should feel assured that they can continue to obtain flood insurance with no lapses in coverage and be able to protect their families and possessions from another damaging storm.

Realtors® are committed to helping individuals and families across the state as they continue to rebuild their homes and lives. To aid in the Sandy response, the National Association of Realtors® has raised $2.3 million through its Realtors® Relief Foundation and has stood up for New Jersey's residents by supporting supplemental funding for federal agencies involved in the recovery, including additional borrowing authority for the NFIP.

The bottom line is that the government's flood insurance program really does work; it increases the number of self-insured properties in the state and across the country, reduces the cost of governmental post-disaster assistance, and it saves money for all of New Jersey's residents, who are less exposed in the future to more costly taxpayer-funded post-disaster relief efforts.

Gary Thomas is 2013 president of the National Association of Realtors®