Federal Flood Insurance Lapses as Congress Recesses

In recent weeks, the attention of lawmakers and the nation stayed pinned on health care reform, while an extension of the federal flood insurance program was left untouched before Congress went into recess until April 12.

Consequently, on Sunday, March 28, 2010 at midnight, the program lost its authority to write new policies. Insurance agents are no longer able to issue new policies or to renew existing ones. Many lenders require such policies to close real estate sales in areas where flooding is an issue.

The extension of the National Flood Insurance Program is included as a provision in an unemployment benefits bill, which was blocked by Senator Tom Coburn, R-Okla on the pretext that its passage would add to the federal deficit.

A similar situation occurred at the end of February when the NFIP program was shut down for several weeks until it was renewed by Congress on March 2. When Congress returns to session on April 12, the program can be reinstated retroactively, but in the meantime, the absence of flood coverage will likely stall some pending home sales.

Although no new policies can be written, those customers with existing coverage will not lose their benefits in the event of a claim. Policy holders can turn to the Federal Emergency Management Agency’s site at fema.gov for information on handling claims and related matters while the program is, hopefully, on temporary hiatus.