National Flood Insurance Program (NFIP) - FEMA Info and Updates

Congressional Authorization of the
National Flood Insurance Program (NFIP)
Lapsed March 28, 2010 at Midnight.

This means that until Congress approves reauthorization of the NFIP:

• no new NFIP policies will be issued,
• existing NFIP polices due for renewal during this time will not be renewed, and
• increased coverage requests will not be processed.

Congress is not expected to revisit consideration for NFIP reauthorization until it returns to session April 12, 2010.

Existing Policies

Existing NFIP flood insurance policies in effect prior to the program lapse (with coverage period effective during the lapse) will be eligible for claim payments for covered damages incurred during the effective dates of the policy.

Impacts on the Lending, Home Mortgage & Building Industries

This program lapse has huge implications on the lending industry and home mortgage/building industry. New NFIP flood insurance policies cannot be issued without Congress' reauthorization of the NFIP. Real estate transactions for properties in the Special Flood Hazard Area (SFHA) or other areas where the lender requires flood insurance to close the loan will not go through unless similar coverage to the NFIP's flood insurance policy can be found in the private insurance marketplace that is acceptable to the lender.

Information about the program lapse and FEMA Memos can be found on the ASFPM website under "Working with Congress". Status updates will be posted at www.floods.org as they occur.

Frequently Asked Questions (FAQ) Concerning NFIP Re-Authorization FAQ – Consumers

1. Why can’t my insurance company just issue me a flood policy? Why do we need an act of Congress?
     Your insurance company issues flood policies as part of the National Flood Insurance Program (NFIP) under an arrangement with the Federal Government. The NFIP operates under authority from Congress that has to be renewed periodically. That authority to issue new policies expired at midnight on March 28, 2010, and is awaiting Congressional renewal. Thus the NFIP will experience a hiatus – a period without authority to issue new policies, issue increased coverage on existing policies, or issue renewal policies – until Congress reauthorizes it.

2. How does the “hiatus” in authority for the NFIP affect me and how long will it last?
    Most of the 5.6 million flood insurance policyholders nationwide will not be affected. Policies that are in force will remain in force, and claims under those policies can continue to be paid after March 29, 2010. However, during the hiatus we will not be able to issue new policies, issue increased coverage on existing policies, or issue renewal policies. Therefore, the limited interruption is of concern to property owners who need to renew policies, homebuyers who must purchase flood insurance as a condition for obtaining mortgages from federally regulated lenders, and property owners refinancing existing mortgages who must purchase or renew coverage.

The hiatus is expected to be brief. We are doing everything we can to communicate with our insurance and lending industry partners to see that this issue is resolved with as little disruption of insurance operations as possible.

3. Has this lapse in Congressional authority for the NFIP ever happened before? Did Congress make the reauthorization retroactive before?
    Yes, there have been several lapses in authority for the NFIP in the past. In most of those cases, Congress reauthorized the NFIP retroactively.

4. If I purchased flood insurance coverage, as required by my federally regulated lender, for a loan closing on or before March 28, 2010, will my policy be issued?
    If the premium payment was part of the loan closing and made from the escrow account (lender’s check), title company, or settlement attorney, and is received by the insurance company within 30 days from the closing, the policy will be issued.
If the premium was not part of the closing, meaning the borrower wrote his/her check at or before closing, both the application and premium must be received within 10 days of the closing date, in order for the policy to be issued.

5. If I purchased flood insurance coverage on or before March 28, 2010, but was not required to do so by my lender, will my policy be issued?
     If the application and premium payment were made prior to March 29, 2010, and are received within 10 days from the application date, the policy will be issued.

6. My flood insurance policy is set to expire on April 1, 2010. I received my renewal notice on March 1, 2010, but did not send my payment to my insurance company until March 28, 2010. Will my insurance policy be renewed?
     Yes. As long as the renewal notice was issued prior to April 1, 2010, and the payment is received before the end of the 30-day renewal grace period, the company is authorized to renew the policy.
NOTE: Effective March 29, 2010, insurance companies are no longer authorized to issue renewal notices until Congress reauthorizes the program.

7. I have a loan closing on April 1, 2010, and have been told by my lender to purchase flood insurance before settlement. Will I be able to purchase a new flood insurance policy?
     Insurance companies cannot issue new flood insurance policies for loans closing on or after March 29, 2010, until the NFIP is reauthorized. However, it has been recommended that the companies hold new applications and premium payments for processing until the reauthorization is received. If Congress retroactively reauthorizes the program, then these policies may be issued with effective dates as early as March 29, 2010. If Congress does not retroactively reauthorize the program, the earliest effective date for these policies will be the date the NFIP is reauthorized.

8. If I suffer a loss during this hiatus, will my claim be paid?
     Claims for existing policies and new policies issued based on premiums received prior to the hiatus are not affected, and the claims will be processed. Claims for new policies where the premiums were received and held by the company during the hiatus will not be paid until Congress reauthorizes the NFIP. However, your insurance company can proceed with investigating your claim under a “non-waiver” agreement, up to the point of payment. Under the “non-waiver” agreement, the company would reserve the right not to pay the claim if Congress does not reauthorize the NFIP.

9. How will I know when the NFIP has been reauthorized?
     FEMA will notify NFIP stakeholders so they can pass the information on to their customers.