 |
 |
06/09/05 - There are a number of caveats that arise with the National Flood Insurance Program, adjusters and private insurance companies whom administer these policies. One thing everyone living along the river with flood insurance should be aware of before initiating an NFIP claim is the NFIP's repetitive loss guidelines.
To put them in a nutshell, a flood policy will be taken out of the hands of one's personal insurance company and administered by the Special Direct Unit (SDU) of the NFIP if any of the below are true: a) Four or more paid flood losses of more than a $1,000 each or b) Two paid flood losses with-in a 10-year period that, in the aggregate, equal or exceed the current value of the insured property or c) Three or more paid flood losses that, in the aggregate, equal or exceed the current value of the property. The above applies regardless of the number of owners a property has.
The underlying threat is that the SDU can prompt FEMA local offices and state and local officials to adopt & enforce mitigation ordinances for the locations of these properties; including elevating, demolishing and removal of said building. For future marketability of a property, one might want to think twice about filing a claim, if one has already used more than 1/2 of those guidelines.
One misconception some have is that taxpayers foot the bill for paying NFIP claims. This is not the case at all. The claim payments are all funded by policy premiums. The only place that taxpayer dollars could come into play would be in a circumstance where so many disasters and claims are filed at one time that it exceeds the policy reserves. In this case the NFIP has the authority to take short term loans with the Feds until the reserves are replenished. Those loans are then repaid with interest by the NFIP in the short term. One thing that is almost certain (after the series of hurricanes and floods of the 12 months prior to 4/05) is that premiums for flood policies will increase.
If my understanding of the workings of the NFIP are correct, it's a decent program in general. It prompts property owners that have large ongoing repetitive losses to build up and reduce their exposure, while providing a level of protection for everyone that participates. The only areas of question & concern are 1) their ability to in effect zone some building out of existence. Property owners should have the right to keep living in their dwelling regardless, if they are willing to forgo both NFIP flood insurance and the ability to borrow money from the FDIC insured banks for flood repairs and 2) for the small claims of 4 or more at $1,000 or over (lets say for argument in the $4K range) is overly restrictive over a 50 year period. The program would generate many times over those amounts from the premiums on those particular properties over the same time period.