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Week of 7.7.06

Update: National Flood Insurance

The National Flood Insurance Program (NFIP), instituted in 1968 to mitigate increasing taxpayer funded flood relief, may be given another hand from Congress.

Last month, the House sought to help the program by voting to phase out subsidies on some vacation homes and commercial property and raise insurance premiums at a faster rate. The bill also increases fines for mortgage lenders who do not tell customers they have to buy flood insurance and increases the amount of coverage a property owner can buy.

During last year's hurricane season, the program was jolted by massive claims by 225,000 homeowners estimated at $22 billion. Since the storms, Congress has had to intervene three times to raise the NFIP's borrowing power so the program could continue paying off claims.

Central to the program is the mapping of areas prone to flooding. Flooding threat classifications run from minimal to severe -- areas designated "Special Flood Hazard Areas" (SFHA's). Buyers or builders in these areas are required to purchase flood insurance.

The NFIP covers over 4.5 million policyholders in thousands of communities across the country. For more, see the Center on Federal Financial Institutions, National Flood Insurance Program [pdf]

More from NOW: Katrina: The Response -- Coastal Development and Federal Flood Insurance