National Flood Insurance Program to expire July 31, 2018 if Congress fails to Extend (sales, real estate)

[Sunshine Rules]

Here we are yet again. The National Flood Insurance Program (NFIP) is set to expire in two weeks unless Congress passes legislation to extend the program yet again.

So what would happen if the NFIP lapses?

While existing policy holders would retain coverage if the program is not reauthorized, no new policies could be written. During past lapses in coverage, borrowers were not able to obtain flood insurance to close, renew or increase loans secured by property located within designated flood zones until Congress reauthorized the NFIP.

During the lapse in 2010, it is estimated that 40,000 residential home sales per month were canceled or delayed across the country.

Additionally, homeowners whose policy expires after July 31 would be unable to renew it if the program expires. However, policy holders get a 30-day grace period, so they would at least have coverage for a month after their policy ends.


When Congress last extended the NFIP, the intention was to overhaul the program before the 7/31/2018 deadline. That obviously has not happened. The problem is that the NFIP is not financially sustainable over the long run. According to the Congressional Budget Office, the program is not charging enough in premiums to cover expected claims in catastrophic loss years, and has already borrowed over $30 billion from taxpayers to make up the difference.

There are no easy solutions to the NFIP financial deficits, and it is likely that Congress will do another short term extension to the program to "kick the can" down the road rather than address the underlying problems.


As a home buyer in FL, it's important to know the flood zone designation of any residential property you are considering (that includes condo communities as well) before you write any offers. Flood insurance rates quoted now are not necessarily what property owners will be paying into the future, premium increases are probable. Even if you are paying cash for a property located within a flood zone and therefore are not required to carry flood insurance, if you decide to sell at some point down the line, the flood insurance premium rates may have an impact on sales prices.

By the way, not all homes located within designated flood zones are near water, and not all properties backing up to water are in designated flood zones.

[beach43ofus]

Great information Sunshine. Thank-you for sharing this w/ us. I hope anyone looking to buy here in the future reads your post twice. The 2nd time should be just prior to making any offers.

At least the Government's timing is good w/ this occurring in the Summer, and not during peak real estate season.

I agree, they'll extend it, kick the can down the road and not deal with underlying issues...in our lifetimes.

[DebbCo]

This is timely information for me. I am still educating myself on flood zones and how insurance rates are affected. I am trying to look for homes in Flood Zone X. Any insight on how this would apply?

[beach43ofus]

Originally Posted by DebbCo

This is timely information for me. I am still educating myself on flood zones and how insurance rates are affected. I am trying to look for homes in Flood Zone X. Any insight on how this would apply?

X is the best, and that is the only one I would (and did) buy. I don't see the aforementioned Governmental Ping Pong having any more, or less, impact on X, A, AE, or any other designation. They'll all be impacted the same if there is a mortgage involved.

Worse case scenario, home loans get held up for some period of time until the Feds decide to stop playing games, and resolve it, or delay resolving it until some future date (after they are all out of office most likely).

Don't let this impact your home search. Just carry on...business as usual.

[Sunshine Rules]

Update: House lawmakers passed a four-month extension (until November 30th) of the National Flood Insurance Program this week. However, the Senate still needs to sign off on the legislation before the July 31st deadline.

[beach43ofus]

Has anyone on this forum actually collected on one of these $450 flood insurance claims? Has anyone had a clam denied?

I feel like the $450/year Im paying is a total waste of money, and they'll never pay a claim anyways.

Can anyone proove me wrong about this so I dont feel like I'm being hosed?

[jean_ji]

I feel like that too, but I pay it for peace of mind, real or imagined.

A friend was in a tight money situation after having surgery and being on disability pay for a few months. After paying home insurance for >30 years without one claim, she decided to let it go for a couple of months until she could catch up with finances. A month later, lightning struck her house and started a fire in the attic. It’s been a mess and much more money than the total 30 years of insurance payments to repair her home. Without insurance picking up the tab, many companies wouldn’t even come out to give her estimates.

It comes down to how lucky do you feel and how risk averse you are. I’ll probably continue to pay it and reevaluate if it is no longer subsidized at any point.

[MattMN]

Originally Posted by beach43ofus

Has anyone on this forum actually collected on one of these $450 flood insurance claims? Has anyone had a clam denied?

I feel like the $450/year Im paying is a total waste of money, and they'll never pay a claim anyways.

Can anyone proove me wrong about this so I dont feel like I'm being hosed?

Are you implying $450 is a too-good-to-be-true price? Or that price is only available via 'discount' insurance company?

I'd not had to make a claim. But I'm paying $400/yr as an add-on thru my regular insurance company. I wouldn't expect any more hassle on a flood claim than on any other insurance claim. (meaning any given insurance company might give you lot of problems on any claim at all, or not, depending who they are).

The reason it's not expensive is because if you're only paying $400/year, you are not in a high flood zone, so very low chance payout will be needed. I pay because I've only been in my neighborhood one year, I'm on a lake, and there's a lot of construction so the drains could get clogged with debris during a heavy downpour. Maybe after seeing how my neighborhood handles the water after a few years' weather cycles, I might drop it. Think I'm at 14' above sea level about 4 miles from the gulf.

[sware2cod]

Originally Posted by beach43ofus

Has anyone on this forum actually collected on one of these $450 flood insurance claims? Has anyone had a clam denied?

I feel like the $450/year Im paying is a total waste of money, and they'll never pay a claim anyways.

Most flood insurance policies are from FEMA. Up until very recently FEMA was the only source for flood insurance policies. It's what most people have - FEMA policies. Although they are sold via insurance agents, it's FEMA that pays the claims. The prices are supposed to be the same regardless which insurance agent someone uses. By the same, I mean the same price for that particular property given the chosen coverage and deductibles.

[beach43ofus]

So, nobody has had a claim paid for the $450/yr we' re paying...right?