By Amanda Murphy, Intake Officer

On June 1, the first day of hurricane season, Congress allowed the National Flood Insurance Program (NFIP) to lapse. Again. A bill to continue the program was introduced earlier this year, but failed to pass through Congress. The government then temporarily extended the program through May 31, hoping to resolve the issues before that date. When the bill failed to pass again, the NFIP lapsed for a full month. The good news is that the House has approved a five-year extension of the NFIP. But for a few weeks of hurricane season 2010, predicted to be an active year for storms, New Orleans homeowners were left without a means to purchase or renew flood insurance policies.

Many people do not realize that without the NFIP, New Orleans and other low-lying areas would be uninsured for flood damage. The program was created in 1968. At that time, most insurance providers did not offer flood insurance policies, fearing the cost of large-scale flooding disasters. Under the NFIP, homeowners in flood zones are required to buy policies from insurance companies and the government pays for flood damage with federal funds collected largely from homeowner premiums. This allows for a public-private partnership between insurance companies and the federal government. Insurance companies market and sell the policies and the government bears the risk. The program has been deeply in debt since Hurricane Katrina struck, causing critics to doubt the efficacy of the program. Fortunately, the government recognized that the need for homeowners to be able to purchase flood insurance trumps the problems of the program and agreed to renew the NFIP.

While it is a relief that the NFIP is guaranteed for at least five more years, the city of New Orleans is still filled with homes uninsured against flood damages. Only 15% of homeowners who ask Rebuilding Together New Orleans for assistance carry flood insurance. For low-income homeowners, the cost of purchasing these policies can be prohibitive. A large percentage of our homeowners live on social security or disability benefits and make less than 30% of the area median income set by the Department of Housing and Urban Development (HUD). This is especially difficult for families that are still unable to return home and are paying rent in addition to maintenance costs on their property. With limited resources, homeowners are sometimes forced to risk the possibility of going through another storm without flood insurance.

In addition, unlike other forms of insurance, flood insurance policies require homeowners to pay for a full year of coverage at once instead of making regular payments. Many low-income homeowners plan to save up for this major purchase, and are then forced to wait for months until they can get the money together.

For many Rebuilding Together homeowners, returning home is a major factor involved in their ability to maintain flood insurance. Rent can tie up a large portion of a homeowner’s income. It is the hope of Rebuilding Together and other non-profit rebuilding organizations that, if we can finish building projects at no cost to homeowners, this will allow them to save money and maintain flood insurance on their properties.