What happens if the NFIP expires?

January 19, 2018 UPDATE:

Congress has not yet extended the National Flood Insurance Program, which expires at midnight tonight, Friday, January 19th. The NFIP continues to be tied to the Congressional Budget. If there is a government shutdown, the NFIP also shuts down. This will continue to be an issue as Congress intends to only pass short term extensions for the foreseeable future.

We’ll keep you updated as things progress, but please be sure to review the guidance below for recommendations on what to do before, during and after a flood program expiration.

Recent article on the most recent extension: Deadline looming for flood insurance program renewal | The Patriot Ledger


December 26th, 2017 UPDATE: 

Once again, Congress has extended the National Flood Insurance Program as part of a continuing resolution to keep the U.S. government open. The reauthorization deadline is now January 19, 2018. We are advising any current or future policyholders to stay vigilant amid this uncertainty and take into advisement the below recommendations.

Recent article on the most recent extension: Flood insurance program extended, but another deadline looms | The Patriot Ledger


Over the next several months, the National Flood Insurance Program (NFIP) may experience several short term extensions. At the end of each extension there is the possibility of a program expiration if Congress does not act.

When the NFIP expires, no new policies or renewals can be issued. This can affect your ability to be obtain a flood insurance policy.

FEMA recently issued guidance on how the flood insurance program will respond before, during and after a program expiration. Below is the FEMA guidance simplified for consumers.

In all cases, PAY YOUR PREMIUM BEFORE THE FLOOD PROGRAM EXPIRES! Do not take a chance and wait!

Policies

  • If you purchase a new flood policy, the application must be dated before the flood program expires. The policy will become effective after the waiting period or loan closing date, even if it is during the flood program expiration.
  • Payment should also be made before the flood program expires, or you run the risk of not having a policy in force.
  • A flood policy cannot be applied for AND cannot be put in place during the flood program expiration.

Renewals

  • If your renewal bill is issued before the flood program expires, then you should pay your bill before your policy’s renewal date. If remains unpaid, then you run the risk of not being able to renew your policy.
  • Renewal bills will not be issued during a flood program expiration.

Claims

  • Claims will be paid to policies that are effective before and during a flood program expiration.
  • Policies applications may be submitted during a flood program expiration, but any claims for those policies cannot be paid.

Examples

PAYING A RENEWAL LATE: Mr. Flood’s policy renewal date is on December 6th, but he has not yet made his renewal payment. Due to the 30-day grace period, he has until January 5th to pay his policy. However, the flood program expires on December 23rd and Congress does not reauthorize the program until late January. When the flood program expires, Mr. Flood still had not made his flood policy payment. Because of this, Mr. Flood will now not be able to renew his policy and runs the risk of having no coverage, the loss of grandfathering, and more.

APPLYING FOR A NEW POLICY (DUE TO A CLOSING): Mr. Flood is looking to close on a loan on December 29th. Mr. Flood applies for and purchases the policy on December 20th, before the closing date. The flood program expires on December 23rd and Congress does not reauthorize the program until late January. However, because Mr. Flood applied for the flood insurance policy before the flood program expiration, the flood policy goes effective December 29th.

APPLYING FOR A NEW POLICY THAT DOES NOT GO EFFECTIVE: Mr. Flood is interested in purchasing a flood policy for his existing home. The flood program expires on December 23rd and Congress does not reauthorize the program until late January. Mr. Flood applies for coverage on December 30th. The application and payment is taken by the insurance company, but it is held and no policy is issued. When Congress finally reauthorizes the program in late January, the payment is applied and the flood policy is issued. In the meantime, Mr. Flood may or may not be able to find a private flood policy which his lender may or may not accept for coverage during the program expiration. The private flood policy may be more or less expensive than the NFIP flood policy. If the lender will not accept the private flood policy, the lender may force place flood insurance or choose not to lend during a flood program expiration.

EXPERIENCE A CLAIM: Mr. Flood has a flood policy in force before the flood program expires on December 23rd. A massive flood happens and Mr. Flood has a claim. Because his policy was in force before and during the flood program expiration, the loss is paid as usual.


NOTE: This blog post is to be used as a general consumer guidance. This is not the full guidance. For the full guidance, refer to WYO Program Bulletin W-17069.

A couple additional articles that may be of interest:

Imminent NFIP Lapse Will Mean Trouble For Homebuyers In Flood Plains | Banker & Tradesman

What if the NFIP is not renewed on Dec. 22? | Property & Casualty 360

Joe Rossi About Joe Rossi

Joe Rossi is a nationally recognized flood specialist. Rossi joined Rogers & Gray in 2017 and provides a vast depth and understanding of coastal flood issues and legislation. Prior to joining Rogers & Gray, seeking stronger citizen representation on coastal issues, Rossi formed the non-profit Marshfield Citizens Coastal Coalition (MCCC) to educate citizens on flood insurance and mapping issues. Rossi continues to lead the MCCC, and in his role has presented to various communities, associations and other groups and organizations.
He has acquired his associate of national flood insurance (ANFI) and has also acquired his certified floodplain manager (CFM) certification in 2016, one of the highest certifications in the flood insurance industry.
Rossi is a member of the board of directors for the National Flood Determination Association, a trade organization for producers of flood zone determinations. Rossi received his architecture degree from Wentworth Institute of Technology.

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