Flood Insurance Overhaul Caps Rate Hikes at 9% and Offers Targeted Discounts for Low-Income Homeowners

The National Flood Insurance Program Reauthorization and Reform Act of 2025 is a massive overhaul designed to keep the flood insurance program running, make it more affordable for some, and force a major shift toward flood-risk reduction.

This bill extends the National Flood Insurance Program (NFIP) authorization until September 30, 2030, and includes a critical provision allowing the program to continue operating and paying claims even if Congress fails to pass a budget. For anyone who remembers the chaos when the NFIP shut down during past budget fights, this is a major stability upgrade (Sec. 101).

The 9% Cap: Slowing Down Risk Rating 2.0

The biggest change for current policyholders is the new cap on annual premium increases. For the next five years, your flood insurance premium—the “covered cost”—generally cannot go up by more than 9% compared to the previous year. This cap applies until your property reaches its full, true risk rate under the new Risk Rating 2.0 system (Sec. 102).

This is a huge deal for homeowners whose premiums were set to spike under the new risk model. If you’re a long-time policyholder facing a 20% or 30% jump, this 9% cap acts like a financial shock absorber. However, this also means the NFIP’s long-term goal of charging rates that reflect true risk will be delayed, potentially keeping the program financially strained by subsidizing high-risk properties for a longer period.

Means-Tested Discounts: Help for the Juggling Class

For the first time, the NFIP is getting a targeted affordability program. If you own a primary home (up to four units) and your household income is no more than 140% of your area’s median income, you could qualify for discounts on your flood insurance (Sec. 103).

This is aimed squarely at working families and retirees who are house-rich but cash-poor, or those already stretched thin by rising costs. The discount will be graduated—meaning the lower your income, the bigger your break—and is funded by a massive new appropriation starting at $250 million and rising to $600 million by 2028. This section is a clear recognition that flood insurance is becoming unaffordable for many, defining an “unaffordable” premium as one that pushes a household’s total housing expenses above 30% of their adjusted gross income (Sec. 203).

Mitigation Gets the Cash and the Hammer

This bill aggressively pushes flood mitigation, both through carrots and sticks. It allocates substantial funding, including authorizing $1 billion for the National Flood Mitigation Fund over the next five years (Sec. 203). Even more creatively, it gives the NFIP a five-year holiday on paying interest to the U.S. Treasury on its massive debt, and then redirects that interest savings straight into the Mitigation Fund (Sec. 301). The idea: stop paying interest on the debt and start paying to prevent future debt.

However, there’s a big stick for those who refuse help. If the Administrator makes a “bona fide offer of assistance”—meaning an offer that covers 100% of the cost to mitigate your flood risk—and you refuse it, your annual flood insurance premium will be penalized with a 25% increase every year until you accept the help or your premium reaches the full actuarial rate (Sec. 305). This provision is designed to force high-risk property owners to take action, but the definition of a “bona fide” offer will be critical; if a policyholder feels the offer is insufficient or too disruptive, that 25% annual hike is a serious financial threat.

Policyholder Rights: Transparency and Appeals

For anyone who has ever wrestled with a denied flood claim, the changes in Title IV are significant. The bill establishes an Independent Office for Policyholder Appeals (Sec. 404). If your claim is denied, you must go through this new, formal administrative appeal process before you can sue in federal court. Crucially, the office must make a final decision within 90 days of receiving all your information, or the government has to pay interest on your claim if you eventually win.

Furthermore, the bill mandates radical transparency in the claims process (Sec. 406):

• You can see everything: Policyholders have the right to request and receive a complete, unredacted copy of all claim-related documents, including adjuster notes, damage estimates, and engineering reports, within one week of asking for them.
• No report manipulation: Final engineering reports cannot be altered by anyone other than the engineer who wrote them, and the report must be sent to the policyholder before anyone else (Sec. 409).

Finally, the bill shortens the claim processing deadline: the Administrator must now make an initial decision on your claim within 60 days of receiving your proof of loss, with a possible 30-day extension for “extraordinary circumstances” (Sec. 408). If they miss the deadline, they owe you interest starting from the day you filed the claim.