Sept. 25 (Source: By Jeff Frantz, The Patriot-News, Harrisburg, Pa.) - Q: What is the National Flood Insurance Program? A: Since 1968, federal government has backed nearly every flood insurance policy issued in the country.
Homeowners buy their policies from an agent who sells other types of insurance. But unlike homeowner?s insurance, for example, the company doesn?t pay claims. The government does.
Q: Why is the government providing flood insurance? A: Because private insurance companies don?t.
Most types of insurance have large risk pools. For every time an insurance company pays to repair a smashed car, there are hundreds of drivers paying for insurance without crashing. It?s why it works as a business.
Flood insurance isn?t like that. Around 500,000 people live in Cumberland, Dauphin, Lebanon, Perry and York counties. Only 6,516 homes have flood insurance. Almost all of them are at high risk of flooding. People who live on higher ground, rightly or wrongly, almost never buy flood insurance.
So the risk pool is small. When the water rises, most of the policy holders are affected. The companies ? if they offered policies ? would get soaked.
Private insurers fled the market in the 1960s. That?s when the government stepped in.
Q: So how does a government-run insurance program work as a business? A: It doesn?t.
Critics say homeowners pay much lower premiums than they would in a private insurance market. That would explain why the flood insurance program is nearly $18 billion in debt, much of it stemming from Hurricane Katrina losses.
While the U.S. House of Representatives and the Senate have yet to agree on a long-term reform, almost everyone in Congress agrees premiums will rise. A House bill, for example, would cap the maximum rate increase at 20 percent, per year.
Q: Why shouldn?t homeowners save on the premiums and just wait for a FEMA check? A: It doesn?t work like that. Many homeowners who suffered flood damage for the first time this month were surprised to learn the Federal Emergency Management Agency doesn?t give out free money to those who suffer disasters. Instead, it mostly provides low-interest loans that homeowners will have to pay back.
?None of the programs the government provides are designed to make anyone whole,? said Dave Bollinger, a mitigation coordinator for FEMA. ?They?re assistance programs. They?re designed to assist you in putting you on the road to recovery.?
FEMA only comes in after the president says your home is in a federal disaster area. Flood insurance pays homeowners based on their policy whenever there is damage.
Most people who live in a high-risk flood area are required to carry flood insurance as part of their mortgage.
Q: So why does FEMA keep bailing out the same people over and over again? A: It doesn?t. If you receive disaster aid because of flood damage, and don?t then buy flood insurance, you are not eligible to receive assistance the next time a flood hits.
Q: Then what about the government buying out people?s homes? A: In an attempt to discourage people from living in the riskiest areas, the flood insurance program created the severe repetitive loss program four years ago. If a policyholder?s home has been damaged four times within the past decade, or up to 50 percent the value of the structure, the program offers the homeowner the assessed value of the home to move out.
Returning the property to its natural state is cheaper for the government than continually paying premiums.
If the homeowner declines, and they don?t want other flood-mitigation tools built into their homes, the flood insurance program can raise their premiums up to 50 percent a year.
After a disaster, people without flood insurance might be able to apply for a hazard mitigation grant, which also buys out homes. But the local government must join in, and the competitive program only lasts until the allocated money ? 15 percent of an area?s total damages ? runs out.
Q: How do I get flood insurance? A: Visit www.floodsmart.gov.
By punching in your address, you can get a rough idea of how at risk your home is of flooding, what a premium would cost and agents that deal with the flood insurance program.
Sources: FEMA, the American Insurance Association.
___
(c)2011 The Patriot-News (Harrisburg, Pa.)
Visit The Patriot-News (Harrisburg, Pa.) at www.pennlive.com
Distributed by MCT Information Services
A service of YellowBrix, Inc. Publication date: 2011-09-25
Source: By Jeff Frantz, The Patriot-News, Harrisburg, Pa.
Source: http://www.loansafe.org/frequently-asked-questions-about-the-national-flood-insurance-program
new facebook layout yalta dancing with the stars results ron artest hpq raising hope oman
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.