US House Bill Aims to End Private Flood Insurance Coverage Penalty

Homeowners required to purchase flood insurance can utilize private flood policies, under federal rules that took effect in 2019. But if they go that route, the property owners risk losing lower, grandfathered premiums if they ever return to the National Flood Insurance Program coverage.

Now, two Florida members of Congress have re-introduced legislation that would eliminate that quirk in the rules. The Continuous Coverage for Flood Insurance Act, HR 6620, would lower federal disaster costs by allowing consumers more options to maintain flood coverage, U.S. Rep. Kathy Castor, D-Tampa, and Rep. Maria Salazar, R-Miami, said in a statement.

“Our bipartisan legislation empowers consumers with more options by allowing access to private flood insurance, without penalty,” Castor said. “For coastal communities like Tampa Bay, healthy competition can lower costs, expand the insurance pool and help bring down flood insurance rates.”

The rate rule stems from the 2012 federal law that required federal lending institutions to accept some non-NFIP policies to satisfy flood insurance requirements. Regulations were finalized in 2019.

But property owners found that once they switched then later tried to switch back to NFIP coverage, their premiums were significantly higher.

“Currently, the NFIP requires continuous coverage to be eligible for grandfathered rates, but only counts the time in an NFIP policy,” Castor and Salazar said in the press release. “If a policyholder chooses to leave the program and return later, the NFIP will charge the full, non-grandfathered rate even if the policyholder decides to obtain a non-NFIP insurance policy that complies with the new rule.”

That rule acts as a deterrent to some consumers who may seek private flood insurance coverage on their properties, or they may forego the loan or insurance altogether.

HR 6620 has been assigned to the U.S. House Financial Services Committee for consideration.

The representatives’ bill action comes as research suggests that federal flood maps are less accurate that feared, leaving millions more properties in hazard-prone areas. Neptune Flood, a private flood insurance provider based in St. Petersburg, Florida, said its research group had found that 84% of Federal Emergency Management Agency flood maps are outdated.

Official maps have identified about 8 million properties as high-risk, but research from the First Street Foundation shows the real number is more like 17.7 million, Neptune reported.

Photo: Resident Mike Kelley navigates flooded streets in Geneva, Florida, as floodwaters rise after Hurricane Ian in 2022. (Joe Burbank/Orlando Sentinel/AP)