(Sept. 11, 2020) The National Flood Insurance Program’s authority to provide flood insurance is currently scheduled to expire on Sept. 30.
The National Association of Realtors is making every effort to secure a long-term reauthorization of the program and is urging the longest extension possible, while Congress continues working toward a five-year NFIP reauthorization measure.
If there was a lapse in NFIP’s ability to provide flood insurance, here is a list of what would happen:
• NFIP cannot sell new or renew flood insurance policies after 11:59 p.m. (Eastern) on Sept. 30.
• Existing NFIP policies will remain in effect until their expiration date (i.e., the renewal date plus a 30-day grace period), and claims will continue to be paid as long as FEMA has the funds on hand.
• Renewal policies are generally issued as long as the application is received prior to a lapse and the premium is received within the 30-day grace period. Other renewals must wait for reauthorization.
• During a lapse, property buyers can assume existing/renewal policies. Assignment of policies allows insurers to substitute the buyer’s name for the seller’s without having to reissue the policy.
• Private flood insurance backed by a source other than NFIP (e.g., Lloyd’s of London) are not affected.
• The federal requirement to purchase flood insurance is suspended during a lapse, which means it would be up to lenders to decide whether to make loans in special flood hazard areas while NFIP insurance is not available.
– Lauren Bunting is a licensed Associate Broker with Atlantic Shores Sotheby’s
International Realty in Ocean City.