National Flood Insurance Program Up for Review

Congress created the National Flood Insurance Program (NFIP) in 1968.  The program was intended to help provide a means for property owners to obtain financial protection.  The NFIP offers flood insurance to homeowners, renters, and business owners if their community participates in the NFIP. Participating communities agree to adopt and enforce ordinances that meet or exceed FEMA requirements to reduce the risk of flooding.  Both Clallam and Jefferson Counties are participating communities in the program. 

The Program is basically a partnership between the government (FEMA) and private insurers.  There are almost 90 private insurance companies working closely with FEMA to offer flood insurance to property owners and renters. In order to qualify for flood insurance, a community must join the NFIP program and agree to enforce sound floodplain management standards. In exchange, the NFIP offers flood insurance which can be purchased through property and casualty insurance agents. Rates are set in the program.  They do not differ from company to company or agent to agent and depend on specific factors, such as the date and type of construction of your home, along with your buildings level of risk.

Flood insurance protects buildings and contents but not the land they sit on.  Building coverage includes the building and foundation, electrical and plumbing systems and central air conditioning equipment, furnaces, and water heaters.  Refrigerators, stoves, and various built-in appliances are also covered as are permanently installed carpeting.  Clothing, furniture, electronic equipment, portable appliances, clothes washers and dryers and movable carpets are protected under contents coverage. 

In the event of a claim for flood damage, reimbursement will be by Replacement Cost Value (RCV) or Actual Cash Value (ACV). The RCV is the cost to replace damaged property. RCV is reimbursable to owners of single-family, primary residences if they carry insurance at least equal to 80% of the buildings replacement cost. Other buildings and their contents are generally valued at ACV, which is the RCV of the item at the time of loss minus physical depreciation. Personal property is always valued using the Actual Cash Value.

Some people have charged that the program is not actuarially sound and there have been attempts to reform it.  So far, no overall reform of the program has produced results.  With the authorizing legislation about to expire, congress bit the bullet and passed a two-month extension of the program with a promise to examine and reform the program.  Had the temporary measure not passed, the program would have expired on May 31.  The result of losing the NFIP program would be dire accord to some in the real estate arena.  It could create a major headache in the real estate area. 

Your Washington home insurance agent is prepared to help you find, interpret and understand flood insurance through the NFIP.  All you need do is call

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