Flood insurance lifeline extended — but new deadline looms for NC homeowners

After a 43-day lapse triggered by the federal government shutdown, the nation's flood insurance program (NFIP) has been reauthorized until Jan. 30, 2026.

But lawmakers are facing mounting pressure to overhaul a system that has been under scrutiny for years and is currently over $22 billion in debt.

With a looming deadline and no easy fix, experts warn that another lapse could leave millions of high-risk properties in limbo or uninsured, including in North Carolina.

NFIP is "in real trouble," Insurance Commissioner Mike Causey told The N&O.

"Too few people participate and those that do are at highest risk," he said, leaving the program with a skewed risk pool. "When we have a major storm, NFIP has to pay out billions of dollars in claims, and it drives up the premiums."

Since the late 1960s, NFIP has anchored mortgage eligibility and collateral in flood-prone areas. It's managed by the Federal Emergency Management Agency (FEMA) and accounts for 88% of the nation's flood insurance.

Periodically, Congress must renew NFIP's statutory authority to operate.

In recent months, President Donald Trump said he'd like to dismantle FEMA -- and NFIP -- as part of a broader plan to reduce the government's size. Critics argue the program is unsustainable and ill-prepared for the escalating costs of climate disasters.

But opponents warn dissolving the program could drive down property prices and collapse the real estate market.

On Oct. 1, NFIP lapsed after Congress failed to pass a stopgap funding bill and reauthorize the program.

FEMA operated under contingency plans with many non-critical services delayed or suspended. It had authority to pay valid claims with available funds, but could not sell or renew policies.

On Nov. 12, the government reopened, ending the longest federal shutdown in U.S. history. Trump signed legislation that temporarily extended NFIP's authority. It also backdated the extension to Oct. 1, ensuring that any claims filed during the lapse could be processed and paid.

Even so, it disrupted the housing market, said the National Association of Realtors (NAR). It estimated the lapse impacted approximately 1,300 property sales each day -- or roughly 55,900 closings.

It also created more uncertainty for flood victims like Rebecca and Ryan Blough from Pittsboro. In July, Tropical Storm Chantal destroyed their home in northern Chatham County. Even though they had basic flood insurance, it's insufficient to cover their losses. They remain in limbo.

"I've reached out to every legislator I can find, but no one has responded," Rebecca Blough said in October. "It feels like we're getting lost."

Congress must now reauthorize the program no later than 11:59 p.m. on Jan. 30, 2026.

NFIP's authorization has lapsed at least four times since 2018. Congress eventually restored the program over a cycle of short-term extensions.

But now, FEMA is calling for more drastic action.

"NFIP's reauthorization is an opportunity for Congress to take bold steps to reduce the complexity of the program and strengthen the NFIP's financial framework," FEMA said on its website updated Nov. 19.

"The level of damage from recent catastrophic storms makes it clear that FEMA needs a holistic plan," it added.

In North Carolina, the rate for flood insurance, on average, is $1,187 per year through NFIP, according to the latest LendingTree data.

Due to gaps in FEMA's flood modeling and limited regulatory enforcement, more than 13 million properties nationwide are facing substantial flood risk without sufficient coverage, estimates First Street, a New York-based nonprofit that assesses flood risk in the U.S.

That includes 10 million properties outside FEMA's designated hazard areas, where insurance is required.

In North Carolina, almost 654,000 properties, about 12% of the state's total properties, are in 100-year flood zones, based on First Street's modeling. That's almost three times higher than FEMA's latest analysis.

Meanwhile, 5% of current NFIP policies, about 235,000 properties, are too risky for the private market.

"While private insurers may fill some gaps, coverage could be become less consistent, straining household finances and complicating mortgage markets," First Street said.

Groups like the NAR are pushing to attach the "longest possible extension" to upcoming appropriation bills in January so that Congress can continue working on "long-term reauthorization." They're also calling for regulatory reforms to expand private market options.

Separately, commissioner Causey joined Gov. Josh Stein on Nov. 14 in urging Congress to pass bipartisan legislation that would authorize NFIP to offer pre-collapse coverage so that coastal homeowners could demolish or relocate condemned structures before they fall into the ocean.

Since 2020, 27 oceanfront houses have collapsed into the ocean on North Carolina's Outer Banks, including 16 houses just since this September.

©2025 Raleigh News & Observer. Visit newsobserver.com. Distributed by Tribune Content Agency, LLC.