The NFIP has been in limbo since 2008, when Congress could not reach an agreement on bipartisan legislation to reform and reauthorize the flood program in the wake of huge losses from claims in 2005 after hurricanes Katrina and Rita.

The NFIP has been operating on temporary extensions since Sept. 30, 2008.

In 2010 alone, the NFIP lapsed four times and flood coverage could not be purchased or renewed for a total of 53 days.

Matt Gannon, assistant vice president for federal affairs for the National Association of Mutual Insurance Companies, says "It would be extremely irresponsible for Congress to allow the NFIP to expire on Sept. 30."

The lapse will delay all settlements of real estate transactions in current flood plains until the NFIP is reauthorized—an interruption the struggling housing market can ill afford. 

"Furthermore, the threat of floods occurring during the lapse makes this a game of roulette with the federal government's money," Gannon says.

"The current disaster aid levels being debated could be wishful thinking if another natural disaster strikes without adequate flood insurance coverage," he adds. "Letting the NFIP lapse is a great way for Congress to put more of the taxpayers' money at risk."

Charles Symington, senior vice president, government affairs, for the Independent Insurance Agents & Brokers of America, remains optimistic though the defeat of the continuing resolution "caused a hiccup in the Congressional schedule."

The House and Senate will come to an agreement before the Sept. 30th deadline to keep the federal government open and the NFIP operating until Nov. 18, he predicts.

"This development certainly highlights the need for the NFIP to receive a long-term extension so that there can finally be some certainty for consumers," says Symington. "For far too long, consumers and the industry have had to face the threat of looming expirations multiple times a year."

Blain Rethmeier, a spokesman for the American Insurance Association, agrees and says it is the association's hope that another continuation resolution makes it through the House and the government will not be forced to shut down.   

"Another lapse in the program would have serious implications," he says.  

The money would be used by the Federal Emergency Management Agency to provide emergency disaster relief for damage caused by this year's hurricanes, floods, tornadoes and wildfires.

House Democrats objected Wednesday to a provision in the continuing resolution that would have authorized spending $3.65 billion on emergency disaster relief because the amount is much less than that included in a bill the Senate endorsed last week—$6.9 billion—which would be partly offset by $1 billion in cuts to a loan program for alternative-fuel auto manufacturers.

House Republicans demand that the cost of the emergency relief be offset by cuts in other federal programs.

The higher funding level has strong support in the Senate, with 10 Republicans joining all Democrats in supporting the higher level in last week's vote.