In response to skyrocketing flood insurance costs under the National Flood Insurance Program (NFIP), Senators Cory Booker (D-NJ) and Bill Cassidy (R-LA) have introduced a bipartisan bill to provide financial relief to low- and middle-income homeowners.
The Flood Insurance Affordability Tax Credit Act aims to ease the burden of rising premiums by offering a 33% refundable tax credit to eligible NFIP policyholders. The tax credit would apply only to primary residences and exclude married taxpayers filing separately, according to the legislation.
Relief for Policyholders Facing “Outlandish” Premiums
Senator Cassidy criticized the current NFIP premium structure, calling it “outlandish” and unsustainable for many homeowners. He emphasized that the proposed tax credit would not only help current policyholders but also encourage others to re-enroll in the program.
“This tax credit provides relief to current policyholders and offers a path for others to regain access to flood insurance while we work to fix the broken system,” Cassidy said in a statement shared by AM Best.
The bill also instructs the Treasury Department to establish a program allowing premium payments to be made in advance on behalf of policyholders, a measure aimed at further alleviating financial pressures.
Rising Flood Risks and Insurance Costs
Senator Booker highlighted the increasing challenges faced by homeowners in flood-prone states like New Jersey, where rising risks from extreme weather events have coincided with higher insurance costs.
“This bipartisan legislation will provide much-needed relief for low- and middle-income households, particularly in New Jersey,” Booker said. “It is a critical step toward expanding access, lowering costs, and safeguarding families from the impacts of extreme weather and flooding.”
NFIP Solvency Concerns
The bill comes amid growing concerns over the NFIP’s solvency. A recent report from FEMA, which oversees the program, outlined the financial strain caused by efforts to phase out subsidies and increase premiums to achieve rate adequacy.
While these changes aim to stabilize the NFIP’s finances, they have led to a significant drop in policyholder participation, with many homeowners unable to afford the higher premiums. Despite these challenges, the NFIP remains a vital source of flood insurance for millions, especially in regions with limited private market options.
This proposed legislation could mark an important turning point for the NFIP, providing immediate financial relief to vulnerable homeowners while addressing long-term participation challenges.