NFIP Reathorization News
The National Flood Insurance Program relies on authorization from Congress to function. The re-authorization process
can sometimes suffer delays. Please
check here to get the lates news on the NFIP re-authorization process.
7/1/10 - Congress Reauthorizes the NFIP until September 30, 2010
As anticipated, the National Flood Insurance Program (NFIP) funding has once again been extended until September 30, 2010 in the latest extension granted by Congress until they can consider more meaningful changes to the Federal flood insurance program.
The Senate last night passed/adopted H.R. 5569 by unanimous consent and it is anticipated to be signed into law by the President today. The bill includes retroactive funding to cover the hiatus that began on June 1 when the NFIP program was allowed to lapse.
The National Flood Insurance Program (NFIP) expired on midnight May 31, 2010
and has not been reauthorized by Congress. Consequently, the Program is
experiencing a hiatus - a period without authority to:
- Issue new policies for which application and premium payment dates are on or after June 1, 2010, or
- Issue increased coverage on existing policies for which endorsement and premium payment dates are on or after June 1, 2010, or
- Issue renewal policies for which the renewal premium is received by the company on or after June 1, 2010, and after the end of the 30-day renewal grace period,
until Congress reauthorizes the Program.
While awaiting Congressional reauthorization, FEMA is issuing the guidance below. For the most up-to-date information on the status of the NFIP please visit http://www.fema.gov/business/nfip/nfip-reauth.shtm or call the FEMA News Desk at 202-646-3272.
New Policies
- New policies for which the application was completed on or before May 31, 2010,
and the application and premium payment were received within 10 days of the application
date, will be issued for coverage and will become effective on the requested effective
date, in accordance with the applicable waiting period rules.
- For loans closing prior to the first day of hiatus, when the application
is dated on or before closing and the premium payment is from the escrow account
(lender's check), title company, or settlement attorney, and is received within
30 days from the closing date, the policy can be issued effective the date of the closing.
- For loans closing prior to the first day of hiatus, when the application is
dated on or before closing and the premium payment is not part of the closing
(i.e., the applicant or applicant's representative check or credit card) and
the application and premium were received within 10 days of the application
date, the policy can be issued effective the date of the closing only if the
presentment of premium was on or before the closing date. If the presentment
of premium (check or credit card date) was on or after June 1, 2010, the policy
cannot be issued, even though the application and closing occurred prior to the hiatus.
- For loans closing on or after the first day of hiatus, when the application
is dated prior to the hiatus and the presentment of premium is prior to the hiatus,
the policy may be issued effective at closing so long as premium is received within
10 days of the closing date.
- As always, the starting dates of NFIP coverage depend on the applicable flood insurance waiting period.
Claims
- Policies that are in force before midnight of the last day of effective Program authorization will remain in force, and claims under those policies are to be processed and paid as usual afterwards (once hiatus begins).
- Claims for covered losses occurring during a hiatus, on existing policies and on policies issued effective after the last day of effective authorization, are to be processed and paid as usual.
- WYO Companies may investigate claims under a reservation-of-rights letter or a non-waiver agreement, up to the point of payment. Under either, WYO Companies would reserve the right not to pay the claim if Congress does not reauthorize the NFIP while continuing the investigation of the claim.
- If reauthorization is granted retroactively, WYO Companies can issue policies effective as of the date they receive payments (subject to applicable waiting periods), and claims for covered losses can be processed.
Determining Payment Receipt Dates
New Policy Premiums, Renewal Policy Premiums, Added Coverage Endorsements
- The controlling factor in determining payment receipt dates for new policy premiums, renewal policy premiums, or added coverage endorsements is when the insurance company receives payment, not the standard mail postmark.
- However, proof of mailing receipts or third-party receipts that WYO Companies receive through certified mail or from entities such Federal Express (FedEx), United Parcel Service (UPS), and courier services do serve as payment receipt dates.
- There will be no interruption in coverage if a customer mails the premium and the WYO Company receives it on or prior to midnight of the last day of effective Program authorization. See the exception listed below under Hiatus Scenarios, where the WYO Company is allowed to issue or renew policies even if the premium is received after a hiatus begins.
Hiatus Scenarios
Policies without a 30-Day Waiting Period
- If the reauthorization is not retroactive to the first day of the hiatus, policies without a 30-day waiting period would become effective on the date the reauthorization is effective. This rule applies to loan closings occurring on or after the first day of the hiatus.
Policies with a 30-Day Waiting Period
- If the reauthorization is not retroactive to the first day of the hiatus, policies with a 30-day waiting period would become effective 30 days after Congress has reauthorized the NFIP.
Renewals
- If the renewal offer was issued prior to authorization expiration, and the renewal premium is received before or within the 30-day grace period, the policy can be renewed even if the renewal premium was received after authorization expiration. The same rule applies on an underpayment notice issued before authorization expiration.
- WYO Companies are no longer authorized to renew policies if the premium is received on or after the first day of the hiatus and after the end of the 30-day renewal grace period.
Cancellations
- Existing policies can be canceled during the hiatus in accordance with valid NFIP cancellation reason codes.
Assignment of Flood Policies
- An existing policy can be assigned provided the insured signs and dates the endorsement request.
For more details and FAQs concerning the NFIP reauthorization and how it affects the processing of flood insurance, go to http://www.fema.gov/pdf/nfip/w_10063.pdf.
October 2009 NFIP Changes
Changes to the NFIP Flood Insurance Rate Manual take effect twice a year, in May
and October. The October 2009 manual revisions include changes to Standard
Flood Insurance Policy rates and deductibles, which may impact you. It's important
for you to understand the changes so you can make informed decisions concerning your
flood insurance protection. The items below reflect a few highlights.
Click here
for the full Flood Insurance Rate Manual that provides details for ALL of the October changes.
Rate and Premium Changes
Changes to standard flood insurance policy rates may result in premium increases for some,
on policies written or renewed on or after October 1, 2009. On average, premiums will be
increasing 8 percent; however, individual rate changes may vary - and some policyholders
may see their premiums decrease. Preferred Risk Policy premiums are not changing.
It's important to understand that rate increases take effect regularly to ensure premiums
stay aligned with NFIP costs. Premiums are also dependent upon a variety of factors such
as the amount of coverage and deductible factors, among others.
Another factor driving increases are changes to the basic coverage limits for both
residential and non-residential properties. Standard policy basic insurance limits are
increasing for all categories of building and contents coverage as follows:
- 1-4 Family Dwelling Building Coverage: Basic limit increases from $50,000 to $60,000.
- Residential Contents Coverage: Basic limit increases from $20,000 to $25,000.
- Other Residential and Non-Residential Building Coverage: Basic limit increases from $150,000 to $175,000.
- Non-Residential Contents Coverage: Basic limit increases from $130,000 to $150,000.
Deductible Changes
In addition to rate and basic coverage changes, all policyholders, including
those with a Preferred Risk Policy, will see increases to their standard deductible.
The NFIP is discontinuing the $500 deductible for all properties. New deductible levels are listed below:
- Standard deductible increases from $500 to $1,000 for post-FIRM buildings and pre-FIRM buildings rated as post-FIRM in SFHAs.
- Standard deductible increases from $500 to $1,000 for buildings in non-SFHAs.
- Standard deductible increases from $1,000 to $2,000 for pre-FIRM buildings.
Owners of pre-FIRM properties can pay a surcharge and buy back the $1000 deductible,
so this may be an option for you when your policy comes up for renewal.
It's important to be aware of these changes geing made the The NFIP now so
you're not caught unaware in the event you need to file a claim. Remember
that while your deductibles have increased, it's still just a
fraction of the cost of the average flood insurance claim. Just a few inches of
water can cause tens of thousand dollars in damages.
Application Changes
- Effective on or after October 1, 2009, there will be some changes to language
in the standard application and endorsement forms. Changes to the Flood Insurance
Application, PRP Application, and General Change Endorsement forms will capture
additional community, building, and construction information.
- New information must be provided for all grandfathered policies. Agents are
asked to identify the type of grandfathering (i.e., Built in Compliance, Continuous
Coverage) on the revised flood insurance application form and WYO companies must also
include the grandfathering indicator on the front of the flood insurance policy
declarations page. These requirements may help resolve disputes when a lender has
a different flood zone determination than the agent or insured.
Other Insurance Program Changes
- Two new building types have been added, elevated on crawlspace and non-elevated with subgrade crawlspace
- Pre-FIRM buildings in Unnumbered Zone A areas with a basement, enclosure, or crawlspace may use Post-FIRM rates
if the rates are more favorable to the insured. When policies affected in these zones up for renewal, you may
want to consider rerating the policy applying the new rules. It may result in significant savings.
- WYO Companies must report the source of the building construction date, e.g., Building Permit Date,
Date of Construction, Substantial Improvement Date, etc.
Important DFIRM Change to Note: Paper FIRM to Digital FIRM (DFIRM) Transition
- As of October 1, 2009, FEMA will provide a single paper flood map and Flood Insurance Study (FIS) to each newly mapped NFIP community. FEMA will convert all other distribution of maps and FIS reports for digital delivery. Consequently, paper FIRMs will no longer be available besides this one copy.
- Agents, property owners and others will still be able to access the current and historic maps (for grandfathering) and print FIRMettes by visiting FEMA's Map Service Center.
- A more complete description of this change can be found here.
Click here
for the new Flood Insurance Rate Manual that reflects these changes as well as additional information from the NFIP.
Please email us at ais@aolohainsurance.com with any questions.
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