Legislation creating catastrophic savings accounts–which wouldbe comparable to Health Savings Accounts, allowing homeowners toput money aside tax-free to prepare for the financial impact of amajor natural disaster–has been introduced in the House ofRepresentatives.

The legislation was introduced by two members of Congress fromFlorida–Democratic Rep. Debbie Wasserman-Schultz and RepublicanRep. Tom Feeney. It is similar to a bill introduced in the Senateseveral weeks ago by Florida's two senators–Democrat Bill Nelson, aformer insurance commissioner, and Republican Mel Martinez.

“Addressing disaster relief for Florida's families is abipartisan issue, and I believe Catastrophe Savings Accounts are anexcellent vehicle to empower homeowners and encourage personalresponsibility and preparation,” Rep. Feeney said.

CSAs are structured in the same manner as Health SavingsAccounts. Under the bill, a catastrophe tax-free savings accountcould be opened to cover current and future catastrophe-relatedexpenses.

The money could be withdrawn to cover qualified disasterexpenses tax-free. Qualified expenses will include: deductibles,uninsured losses, flood damage and structural upgrades for futurestorms. Upon retirement, the money could be removed from theaccount penalty-free.

The legislation has strong support in the insurance industry.According to officials at the National Association of MutualInsurance Companies, CSAs “would go a long way” toward encouraginghomeowners to prepare for catastrophes.

Justin Roth, a senior federal affairs director for the NationalAssociation of Mutual Insurance Companies, said the current taxcode “does not encourage either homeowners or insurance companiesto reserve money for future natural catastrophes.”

He added that NAMIC backs the effort by Reps. Feeney andWasserman-Schultz “to finally provide them that ability.”

Rep. Schultz said the bill is necessary in disaster-prone areassuch as Florida, where residents recently experienced back-to-backrecord-setting hurricane seasons coupled with unexpecteddevastating tornadoes.

“This legislation will put the power in the people's hands andencourage them to save and prepare for future disasters,” she said.“In addition to high insurance costs and lack of insuranceavailability, incredibly high deductibles have hurtFloridians.”

Since the savings are tax-free, Floridians get equitable taxtreatment since they use pre-tax dollars to fix damaged property,Rep. Schultz explained.