Talking Points: Flood Insurance
As the leading advocate for private property rights, homeownership, and housing issues, the National Association of REALTORS® believes that affordable flood insurance for communities in flood zones is critical to economic growth and development.
The National Flood Insurance Program, administered by the Federal Emergency Management Agency, protects property owners against flood-related disasters. The NFIP allows homeowners in floodplains to purchase affordable flood insurance, thereby enhancing economic growth and development in communities across the country. The NFIP also enhances the safety of residents in those communities by requiring that flood mitigation programs and practices are implemented.
Recent natural disasters such as Hurricane Katrina have drawn attention to the availability of affordable and adequate flood insurance for properties located in flood-prone areas. Hurricane-related claims in 2005 have been estimated around $23 billion, topping all claims in the history of the flood insurance program.
NAR supports developing floodplain maps that are up-to-date, accurate and easily accessible in an online, digitized format.
Floodplain maps are necessary for mortgage lenders, who have a statutory obligation to require flood insurance on risk-prone homes. The maps also help homeowners assess their risk of flood damage. NAR is concerned that faulty floodplain maps may place properties inaccurately within or outside of flood zones. Inaccurate floodplain maps add cost and time to real estate transactions.
Currently, FEMA is implementing a program to resurvey and digitize all floodplain maps. NAR is working closely with FEMA as the agency develops these new maps, to ensure their accuracy and usability. NAR supports this program and advocates full congressional funding of FEMA’s budget requests to continue and complete the map modernization process. For FY 2008, NAR helped secure an appropriation of $220 million for this effort.
NAR supports imposing higher flood insurance premiums on repetitive loss properties.
NAR believes NFIP should be revised to include risk-based insurance premiums. Properties that are repeatedly flooded and place multiple insurance claims on the NFIP are a significant drain to the program. Flood insurance premiums should fairly reflect the risks that property owners accept by living in a flood zone. Property owners in some low-risk areas should not pay the same federal insurance premiums for comparable coverage as people in high-risk erosion zones.
NAR believes that after property owners have filed three or more NFIP claims and have refused government offers of property elevation or other means of flood mitigation, the property’s premiums should be raised to reflect the flood risk the property incurs by being located in the specific flood zone. Raising premiums on repetitive loss properties will ensure that the amount property owners are paying into the NFIP is proportional to the benefits they are receiving from the program. It will also encourage wiser use of property in areas subject to flooding.
Legislation passed by the U.S. House of Representatives in September 2007, H.R. 3121, would reauthorize the NFIP for five additional years (through September 30, 2013). The U.S. Senate has yet to take up legislation (S. 2284) passed by the Banking Committee in October 2007. It is imperative that Congress pass NFIP reform legislation as soon as possible to ensure the long-term viability of this important program that protects property owners nationwide.
Updated May 9, 2008
