3 Federal Insurance Programs That Have Public Support

federal insurance

Photo from KP Tripathi

While the Patient Protection and Affordable Care Act struggles to find support among the majority of the population, you might be surprised to know that there are three other federal insurance programs Americans are pretty much behind. A new Insurance Journal poll, which you can participate in, shows majority support for crop insurance, terrorism reinsurance, and flood insurance — all federal programs that have existed for a number of years.

As we mentioned in an earlier blog post, the terrorism reinsurance program is in danger of expiring later this year and flood/crop insurance continue as an ongoing source of debate. But just what are these programs and how do they work? Let’s have a look.


The Crop Insurance Contract

According to the USDA, a crop insurance contract is a commitment between insured farmers and their insurance providers. Either party has the right to cancel or terminate the contract at the end of each crop year. Unless the contract is canceled, it is normally automatically renewed the next year.

The contract requires the insured farmer to agree to insuring all eligible acreage of a crop planted in a particular county. The choice occurs on a county by county, crop by crop basis.

“All eligible acreage must be insured to reduce the potential for adverse selection against the insurance provider,” noted the government organization’s website, adding that “Adverse selection generally exists whenever the insured person has better knowledge of the relative riskiness of a particular situation than the insurance provider does.”

Meanwhile, the insurance provider agrees to protect the insured farmer “against losses that occur during the crop year,” covering, in most cases, “loss of yield exceeding a deductible amount.” Also, “Losses must be due to unavoidable perils beyond the farmer’s control.”

Products combining yield and price coverage are currently available, and they cover loss in value due to a change in market price during the insurance period, in addition to the perils covered by the standard loss of yield coverage.

Crop insurance policies will usually protect the insured for other incidents, like the inability to plant or excessive loss of quality due to adverse weather.

“The nature and scope of this ‘helper’ coverage vary depending on the crop,” the USDA explains. “This is because of the differences in crops individual natures.”


Terrorism Reinsurance

Terrorism reinsurance programs were enacted following the attacks of September 11, 2001 (November 2002, to be more specific). They were designed as a federal “backstop” for insurance claims related to acts of terrorism, and signed into law by President George W. Bush. The Act “provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism.” It has expired two expiration dates thus far — December 31, 2005, and December 26, 2007. The current version is set to expire on December 31, 2014, but if IJ’s poll is any guide, it will be the toughest one politically for Congress to sunset since it has received the highest support level. As we noted in a previous blog post, it has also been endorsed by the Insurance Information Institute (I.I.I.).


Flood Insurance Program

Standard homeowners insurance doesn’t cover flooding, and if you have a home — especially a home in a flood plain — you’ll want coverage. That means signing up with the National Flood Insurance Program (NFIP). As FloodSmart notes, “it’s important to have protection from the floods associated with hurricanes, tropical storms, heavy rains and other conditions that impact the U.S.”

In 1968, Congress created the program “to help provide a means for property owners to financially protect themselves,” the site notes, adding that “NFIP offers flood insurance to homeowners, renters, and business owners if their community participates … Participating communities agree to adopt and enforce ordinances that meet or exceed FEMA requirements to reduce the risk of flooding.”


In Summary

While the future may be uncertain for PPACA, the programs listed above largely have the support of the public. With climate change a growing concern in Washington, it’s hard to see the crop insurance program or NFIP going anywhere any time soon. TRIPRA, or the terrorism reinsurance program, however, has a Congressional test to pass before the end of the year.

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