Saving the Flood Insurance Program

Without some type of reform, property owners may start dropping or reducing insurance coverage. More uninsured residents could force higher government payouts when disaster strikes.

However, a Government Accountability Office report found that adding wind coverage would pose significant challenges, including the potential for large deficits.

Many argue that all taxpayers shouldn't foot the bill for risks that only part of the population takes on to live, work, play and further develop near the shore.

"It's a good deal if you need flood insurance and wind insurance," says Steve Ellis, vice president of Taxpayers for Common Sense, a nonpartisan watchdog group. "But if you're anybody else, it's a sucker bet."

Bob Hartwig, president of the Insurance Information Institute, points out that even in the most extreme circumstances, many homeowners won't pay for protection. Though there was a spike in flood-insurance purchases from the NFIP after the 2005 hurricanes, many of those customers did not renew.

"When people are given the option to buy the coverage, even to protect their most valuable asset, most people will not elect to do that," Hartwig says. "They simply won't."

Insurers' Point of View

Today, most homeowner policies do come with wind protection. If the government displaces that system, it will be impossible to spread risk and prices in a reasonable way or have a profitable business, according to Justin Roth, director of federal affairs at the National Association of Mutual Insurance Companies.

"In some areas it's more expensive than others, and rightfully so," says Roth. "It makes sense that someone who lives in a mansion in Miami in South Beach would pay more than someone living in Iowa."