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The National Flood Insurance Program Could Lapse December 22nd, 2017

Wednesday December 20, 2017 09:11 am

  The National Flood Insurance Program Could Lapse December 22nd, 2017

Submit Applications Prior to the Lapse – Don’t Wait!

The National Flood Insurance Program is under discussion in congress, and due to lapse on the 22nd.  This is a second extension, the last, due December 8th.  If Congress does not act prior to the end of session to extend the program, it could lapse for some period of time.  A lapse in authority will not affect most of the 5 million flood insurance policyholders nationwide.  Policies that are in force will remain in force, and NFIP insurers will continue to pay claims under those policies during a lapse. However, new and revised applications will be processed differently based on whether the program was in lapse when the application was submitted and then paid for. 

Under current law, the Federal Emergency Management Agency’s (FEMA’s) National Flood Insurance Program (NFIP) may not enter into a new flood insurance contract after a lapse in authority. Such lapse in authority would significantly impact the NFIP’s normal operations not allowing new or increased policies, but applications submitted before a lapse can be approved. 

 Handling of New Policies or Requests to Increase Coverage

. Standard 30-Day or 1-Day Map Revision Waiting Period 

o If the application date or request to increase coverage is on or before the last day of effective authorization, and the insurer receives the application/request and premium payment within the lapse period and within 10 days of the application/request date, the insurer may issue the policy and it will become effective on the requested effective date, in accordance with the applicable waiting period rules. 

. Loan Closing No Waiting Period

o For loans closing prior to the first day of lapse in authority, when the application or request to increase coverage is dated on or before closing and the premium payment is not part of the closing (i.e., premium payment is via the applicant or applicant’s representative check or credit card) and the application/request and premium are received within 10 days of the closing date, the policy may be issued effective the date of the closing. 

Existing Policies Benefits or Transitions 

  • Existing policies may be assigned during the lapse.
  • Policies can be cancelled during the lapse in authority, in accordance with valid NFIP cancellation reason codes.
  • Policies that are in force before midnight of the last effective day of authorization will remain in force until their expiration date, and claims under those policies are to be processed and paid as usual.
  • If reauthorization is granted retroactively, the insurers can issue policies effective as of the date they receive payments (subject to applicable waiting periods), and claims for covered losses can be processed and paid (subject to provisions of the Standard Flood Insurance Policy (SFIP)).

Calculating Date of Entering into New Flood Insurance Contracts

The date on which a company actually accepts an application for a flood insurance purchase or renewal and the applicable premium within 10 days of the application date will be the date of entry. 

This would be the date and time of the loan closing if the flood insurance contract is related to the making, increasing, extension, or renewal of a loan so long as the company receives the application for flood insurance and the applicable premium within 30 days if paid by escrowed, title company, or settlement attorney or 10 days if not. 

The NFIP has experienced a lapse in authority before. In most of these cases, Congress reauthorized the Program retroactively. However, until Congress acts, the NFIP is unable to provide coverage, and the attachment will  fully inform you of your options during this period.

 If you need more information, please contact your flood insurance agent. 

Related Information

FEMA Bulletin