Flood Insurance Program Drowning in DebtJune 17, 2010 - 4:45 PM | by: Laura Prabucki
Established in 1968, the National Flood Insurance Program (NFIP) is for homeowners who live in flood-prone areas that are considered too great a risk for private insurers.
The program was able to support itself through premiums and fees until 2005, but in blew Hurricanes Katrina and Rita and the program was flooded with claims and it’s now drowning in debt.
$19 *billion* dollars in debt in fact, and the program doesn’t bring in enough in premiums to cover all of the risk and claims. Homeowners also pay below market rates for the insurance.
” For most properties, premiums would probably have to be about twice as high as they are today to even help the program get anywhere near to breaking even, said Mark Calabria, Director of financial regulation studies at the Cato Institute in Washington, DC.
” Even getting the rates to be “fair” doesn’t get anywhere near to paying the deficit. ”
The problem lies in areas which are repeatedly flooded… where homes are repeatedly lost… and rebuilt. While only one percent of the homes insured by the flood program are considered to be these repetitive loss properties, they account for about *40* percent of the claims.
So which states are the worst? Leading the repetitive loss properties is Louisiana with $2.5 billion paid out. Next is Texas with more $1.5 billion, followed by Florida, Mississippi and New Jersey. According to a report by the National Wildlife Foundation, 1 in 10 repetitive loss homes has claims that exceed the value of the house. Recently, the NFIP paid more than $400,000 to raise a home in Pennsylvania by 10 feet. In recent years, more than $800,000 worth of flood claims have been filed for that house and it’s valued at only $500,000.
“Perhaps the thing to do is is to, if a property has been damaged or destroyed by flood more than once perhaps the government ought to say you can rebuild there, but you have to at your own dime,” said Eric Goldberg with the American Insurance Association.
The National Flood Insurance Program has currently expired. Legislation to renew it is held up in Congress, leaving hundreds of thousands of homeowners without coverage during hurricane season.
So how much does this cost you? We crunched the numbers in the Fox News taxpayer calculator. You can find out your share of this program by clicking here.
We also want to know what you think. Do you approve of a bailout of the National flood insurance program? You can log on and tell lawmakers in Washington if this is how you want your money spent.