Under current regulation, property owners who choose to purchase flood insurance in the private market rather than through the National Flood Insurance Program are permitted to, however they could face higher rates if they return to the NFIP, according to the National Association of Realtors.
A new bill, H.R. 2109 or Flood Insurance Market Parity and Modernization Act, which passed today in the House of Representatives by a vote of 419 to zero, seeks to alleviate the problem.
“Realtors know that a robust National Flood Insurance Program is important for protecting consumers and ensuring property sales can move forward in 20,000 communities nationwide,” said NAR President Tom Salomone, broker-owner of Real Estate II in Coral Springs, Florida. “For many, the NFIP offers the only source of coverage that meets federally-related mortgage requirements and protects properties in the 100 year floodplain.”
“At the same time, consumers who wish to purchase insurance in the private market should have the freedom to do so,” Salomone said. “This legislation will help foster a vibrant private flood insurance market while giving consumers the flexibility to return to the NFIP at a reasonable cost if they choose to.”
Currently, the NFIP requires homeowners to have a minimum amount of flood insurance to maintain the lowest available rates, but consider moving to private insurance a break in policy coverage.
When homeowners return to the NFIP, often times after the rates go up on their private insurance or when it is no longer available, according to NAR. At that point, homeowners would face an increase in their rate.
The new bill would allow homeowners to keep the low rate as long as the private insurance they changed to met state requirements.
SmartSafer.org, a national coalition that is made up of a diverse chorus of voices united in favor of environmentally responsible, fiscally sound approaches to natural catastrophe policy that promote public safety made this statement:
“Our nation’s disaster policies urgently need reform, and this bill is an excellent step in the right direction. More competition in the flood insurance marketplace will give consumers access to better coverage and lower rates. For too long, outdated regulations have forced consumers to rely on the NFIP, saddling the program with a $23 billion debt load. We thank the entire House for passing this critical, bipartisan legislation, and we urge the Senate to build on this momentum by also passing this bill.”
If Freddie Mac is to be believed, according to its April 2016 Insight report, more change needs to come soon to the housing insurance market, or climate change could become the next major disruption to flood insurance.