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Competition in the flood insurance market is good

Even though we are one county away from the coast, that doesn’t mean Pearl River County does not have low lying areas.

Flooding is a rare occurrence here, but it does happen during periods of heavy rainfall or when a major hurricane makes landfall. In those instances, many residents are left with water damaged homes and a sometimes extended delay for insurance payments.

Currently, if you live in a flood zone, there’s only one option to insure your home, the National Flood Insurance Program.

Shortly after Hurricane Katrina and then Isaac, the federal government threatened to increase the rate structure for the NFIP to astronomical levels. But after a lot of effort, those increases were limited to 5 percent per year.

According an Associated Press story, about 65,000 Mississippi homeowners have coverage through the federally subsidized program, two thirds of which reside in the three coastal counties. And, with the expiration date for the current law that provides that coverage coming at the end of September, there’s concern coverage might lapse as it has in the past.

When such a lapse occurs, people looking to buy a home in a flood zone are left without a way to secure a loan because most banks require flood coverage for those properties.

And even if the law is renewed, the mandated increases in NFIP policies will continue. This year it’s anticipated that the current 5 percent increase could become an 8 percent increase.

By creating an environment for competition via private flood insurance, the problems with the NFIP could be alleviated.

Currently only one company offers such a policy, and typically only covers properties in low risk areas.

Additionally, by moving to a private policy, the homeowner would lose their discount for discontinuing their policy with the NFIP.

So, until there is a strong market of private policies that would compete for business, it’s not a good idea to drop your NFIP policy just yet.

Hopefully the private market will return, and take some of the burden off homeowners.