Flood Insurance Rates To Increase If Program Is Renewed

The flood damage from Hurricane Irene raises pressure on Congress as it debates how to overhaul the government's debt-strapped flood-insurance program. Unlike wind damage, flood damage typically isn't covered under homeowners-insurance policies. Instead, homeowners and businesses buy coverage from the National Flood Insurance Program.

The program is treading in dangerous waters as Congress debates on whether to continue the program and if so, how much should the annual rates be increased. The Senate is debating the potential of 15% annual increases while the House of Representatives looks at 20% increases for homeowners.

That can be a huge cost increase as these costs compound year over year. What this can mean is that based on the House's proposed increase the rates would increase 298% in 7 years. The Senate's proposal would increase costs 231% in that same 7 year window. That can be a significant cost.

Of course, the program has lost 18 billion dollars over the past few years so the government does need to recoup their losses. And the impact of shutting down the program could be even more extreme for the coastal housing market.

Lawmakers remain unlikely to thrash out a long-term agreement before the program is due to expire Sept. 30th, but a short-term extension of the program is considered likely.