The McCarran-Ferguson Act, passed in 1945, declares that states should regulate the insurance industry while the federal government has the authority to regulate interstate commerce. Under this act, federal law will not preempt state insurance regulations unless the federal law specifically relates to the business of insurance. This means that while homeowners insurance is primarily regulated by state law, federal law can apply in certain circumstances, such as when there is a significant interstate or international component to the insurance issue.
The Flood Disaster Protection Act of 1973 requires that property owners in flood-prone areas purchase flood insurance as a condition for receiving any form of direct or indirect federal financial assistance for acquisition or construction purposes. This act led to the creation of the National Flood Insurance Program (NFIP), which provides flood insurance to homeowners, renters, and business owners if their community participates in the NFIP. Homeowners insurance policies typically do not cover flood damage; therefore, this federal program is crucial for homeowners in flood-prone areas.
The Homeowner Flood Insurance Affordability Act of 2014 was enacted to address the concerns about the affordability of flood insurance after the Biggert-Waters Flood Insurance Reform Act of 2012 significantly increased premiums. This act modifies certain provisions of the Biggert-Waters Act, including the prevention of dramatic rate increases, the introduction of surcharges on all policyholders, and the refund of policyholders who overpaid premiums. It also allows for a greater range of mitigation activities that can be considered when determining flood insurance rates.
FAIR Plans were established in the late 1960s as a response to the inability of homeowners in certain areas to purchase insurance due to factors such as urban unrest and natural disasters. These plans are state-mandated and provide property insurance to individuals who cannot obtain it from private insurers because their property is considered high risk. Each state's FAIR Plan operates differently, but they generally offer basic fire insurance coverage, and some offer additional coverage for other perils such as windstorm or vandalism. FAIR Plans are typically considered insurers of last resort.