Those of use who live on the shore are have lots of questions concerning the NFIP Reauthorization.
Thanks to Sue White, from Bollinger Insurance Solutions, we have some answers to frequently asked questions:
1. 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 28, 2010. However, during the hiatus there are limits on our ability to issue new policies, issue increased coverage on existing policies, or issue renewal policies. The limited interruption is of concern to property owners who need to renew policies that were not renewed prior to the end of the 30-day grace period, 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.
2. 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.
3. 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.
4. 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.
5. 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 March 29, 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.
6. 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, unless the application and presentment of premium were made on or before March 28, 2010, and the application and premium payment were received within 10 days of the closing date. In this case, the new policy may be issued with a requested effective date on or after March 29, 2010. For applications and premium payments made on or after March 29, 2010, it is 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.
7. If I suffer a loss during this hiatus, will my claim be paid?
Claims for existing policies and for new policies issued based on applications and premium payments made 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.
8. What happens if my premium for a new policy or an endorsement for added coverage is received by the company after March 28, 2010, and I suffer a flood loss before Congress reauthorizes the Program?
If the application or added-coverage endorsement and premium payment were made on or before March 28, 2010, and were received by the company within 10 days of the date of application or endorsement and premium payment, the policy or coverage increase will be effective on the applicable date, based on the NFIP waiting-period rules. Claim payments can be made for these policies for losses occurring during the period that the coverage is in force. For applications or endorsements and premium payments made on or after March 29, 2010, the NFIP has suggested that the insurance companies hold premium payments for new or increased policies received during the hiatus. Claim payments for losses suffered during that time cannot be made until Congress retroactively extends the NFIP authority. 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. I have a mortgage loan closing early April, and the lender has told me I have to have flood insurance at closing. What will happen if my premium and application were not received by my insurance company by March 28, 2010?
If the application and premium payment are dated on or before March 28, 2010, and are received by the company within 10 days of the date of application and premium payment, the policy will be issued. If the application and premium payment are dated on or after March 29, 2010, it is expected that your premium will be held by your insurance company in order that your policy can go into effect at the earliest possible date. If reauthorization to issue flood insurance policies under the NFIP is granted retroactively, your policy will be issued effective as of the date of the closing of your loan.
10. If my premium was in the mail, with a postmark before March 28, 2010, did I meet the deadline?
The controlling factor is receipt of the premium by the insurance company, not the postmark. However, if your premium payment is mailed by certified mail or third-party delivery services such as Federal Express (FedEx), United Parcel Service (UPS), and courier services and the like that provide proof of mailing, the premium receipt date is the postmark date or the third-party receipt date.
11. If I suffer a loss during the hiatus, and I met the March 28, 2010, deadline, will I be covered for the loss?
If, based on the waiting period rules of the NFIP, your coverage was in effect at the time of the date of loss, you would be covered. See Question 16 for details about the 30-day waiting period.
12. What happens if my premium payment for a policy renewal was received by the company after March 28, 2010, and I suffer a flood loss before Congress reauthorizes the NFIP? Will I be covered?
If the renewal premium was received prior to the end of the 30-day renewal grace period, the policy will be renewed without a lapse in coverage and coverage will be in effect at the time of the loss. (Note: A 30-day waiting period applies to policies for which premium payments were received after the 30-day renewal grace period.) For renewal premiums received after the end of the 30-day renewal grace period, the NFIP has suggested that the insurance companies hold in abeyance renewal premium payments received during the hiatus. Claim payments for losses suffered during that time cannot be made until Congress retroactively extends the NFIP authority. 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.
13. My policy was up for renewal in late March. Was my policy renewed?
If your renewal premium payment was received by your insurance company on or before March 28, 2010, or received prior to or within the 30-day renewal grace period, your policy was renewed. You should check with your insurance agent to make certain your policy was renewed. If your renewal premium payment was received by your insurance company on or after March 29, 2010, and after the end of the 30-day renewal grace period, your policy will not be renewed until Congress extends the NFIP authority. The effective date of the renewal will depend on the date of the extension of NFIP authority, whether or not the reauthorization is retroactive, and the application of the 30-day waiting period.
14. What happens if Congress does not make reauthorization retroactive to March 28, 2010?
Policies unable to be issued or renewed under the above provisions that are without a 30-day waiting period would become effective on the date the reauthorization is effective. Policies with a 30-day waiting period would become effective 30 days after Congress has reauthorized the NFIP.
15. What happens if the hiatus is lengthy?
If authorization is not granted within a reasonable period of time, premium payments will have to be refunded and the NFIP will not be able to issue the policies paid by premiums held in abeyance.
To contact Sue White, Private Client Advisor
856-205-7466 office
609-425-2078 cell
856-273-3663 fax
sue.white@bollingerinsurance.com
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