Saving the Flood Insurance Program

Congress' flood-insurance debate could have big ramifications for homeowners' insurance bills, and it's putting coastal residents at odds with an assortment of groups opposed to adding wind-damage coverage.

Lawmakers are wrangling over reforms for a federal program that is badly in debt and badly needed by the 47 million people living in Hurricane Alley. President Bush must sign into law a new or modified version of the National Flood Insurance Program, by Sept. 30, the date at which it's set to expire.

One major stumbling block to passing the bill through Congress has been whether to add wind policies to the program, which now covers only flood damage. The topic is scheduled for another congressional debate as early as Tuesday, and many people following the debate expect a decision to be made before the Memorial Day recess.

The legislation that passes will likely extend the program for at least five years, shore up losses with higher premiums and phase out subsidies for commercial property, vacation homes and other nonprimary residences. It might also raise coverage limits and, perhaps most importantly, add coverage for wind damage.

The wind issue has pitted coastal residents against a wide array of groups -- including, but not limited to, the insurance and reinsurance industries, mortgage lenders, realtors, environmentalists, inland residents and laissez-faire capitalists. Coastal dwellers want the most protection at the lowest cost, while the other groups take issue with various parts of the potential law.

Coastal vs. Inland

Homeowners' insurance premiums have skyrocketed in areas like the Gulf Coast and Florida ever since the 2005 hurricane season. Louisiana residents, on average, faced an 11.7% rate hike in 2006, followed by a 3.6% rise in 2007, according to the state's Department of Insurance. Those increases were felt especially in coastal areas.