Many people would think that it would be insane to build a home in an area that floods all the time. It does happen though every day in the United States. It is kind of like the American dream meets an Olympic swim meet.

However, some houses that are located in flood areas have been built and rebuilt dozens of times. Many homes have had the values of their homes paid for dozens of times just in damages. Many have asked if the National Flood Insurance Program needs to assess their criteria so that this does not continue to happen.

Some have suggested a lifetime cap on homes for flood damage based on their values and the times claims have been filed. This might entice these homeowners to move to lower flood risk areas and save the program a lot of money every year.

Currently, the National Flood Insurance money is hemorrhaging money like a burst water pipe. Because people pay their flood insurance premiums they are entitled to compensation for their damages no matter what.

More than five and a half million homes are insured by the insurance program. It needs to survive or many people will be left trying to get the federal government to step in when floods occur. States are overwhelmed and cannot handle compensating homeowners if the program keeps losing money.

The Flood Insurance Program has asked the federal government for approximately nineteen billion dollars to help compensate for its losses. Hurricane Katrina was a category five hurricane which financially strapped the program. Residents in Louisiana and Mississippi filed thousands of claims and the program was unprepared for this.

Because FEMA helps to operate the program, most people expect that taxpayers will always have to bailout the program as long as it is in the red. Some people have suggested that flood insurance premiums need to increase in higher risk areas to help recoup these massive losses. However, Congress probably would not stand for massive flood insurance hikes because many people are unemployed and the economy is bad.  Flood insurance rate increases will not be popular especially with 2010 being a big election year.

There needs to be more done to make it harder for people to live in high risk flooding areas and constantly be filing flood insurance claims. By law, Congress cannot tell people where to live or where they cannot live. For most people, their coverage is not expensive and cannot be canceled unless they do not pay their monthly premiums so they have nothing to lose.

Many people could not imagine the heartbreak of having their homes flooded every year and having their possessions ruined. For some, they enjoy it and can get new possessions every year or every few years so they enjoy the benefits of living in this type of flood area.  Hopefully, the flood insurance program will be able to change its practices so that homeowners are not at risk because of homeowners who make dozens of claims. In the next few years, we will see if the program can revive itself financially and come out of the red and be able to help people for the long term.

Source: Washington Examiner