On Tuesday, a bill to renew the National Flood Insurance Program(NFIP), which is set to expire this September, passed a key hurdle in the Senate.  Lawmakers have stepped up their efforts to reauthorize the program which is run by the Federal Emergency Management Agency(FEMA).

The Senate bill would extend the program through 2013, while forgiving a $17 billion NFIP debt run up by the Federal Emergency Management Agency after 2005’s Hurricane Katrina.

Unlike a similar bill passed last year in the House of Representatives, the Senate bill would not add wind damage coverage to the program.

With the start of the hurricane season less than a month away, there are still a large number of residents without adequate flood coverage.  Researchers are predicting well above average hurricane activity for the Atlantic basin this year.

While FEMA has done it’s best in trying to get the word out, there is still a large lack of awareness for many Americans about flood insurance in general.  Unlike wind damage coverage which can be purchased from regular property insurers, there is for the most part no private market for flood insurance.

The facts are that flood damage can happen no matter what state you live in.  Even in the highest risk areas, only a small percentage of homeowners purchase flood coverage.  Many Americans have left themselves wide open to heavy losses with little to no recourse.

It’s estimated that about 30% of Americans still mistakenly believe that flooding is covered under their regular homeowner’s policy.  Heavy rains in the Midwest have brought flood insurance back into the spotlight.

Since insurance companies don’t typically offer this kind of coverage the government has had to step in and become the “insurer of last resort”.  In 1968, Congress established the National Flood Insurance Program(NFIP) which is under the direction of the Federal Emergency Management Agency(FEMA).

The program offers flood coverage to residents in communities that follow FEMA guidelines for floodplain management and damage mitigation.  Annual premiums are normally in the $400-$500 range for a median priced home.  While regular insurance carriers don’t offer the coverage itself many of them have entered into agreements with the program to accept payments for the flood coverage and maybe able to offer you some advice.

The program is often criticized because it encourages people to build and reside in flood prone areas.  Nonetheless if you live in these areas currently, you should take advantage of it.

Since it’s a federal run program, premiums are artificially low.  If private companies were to offer flood insurance, rates would be much higher.