Government Shutdown Means No New Flood Insurance Policies

What Government Shutdown Means for your flood insurance

By Ricky K. Patel, Esq.

The government shut down last week after Congress and the president failed to pass a new funding bill. The National Flood Insurance Program (NFIP) was among the federal programs affected by the shutdown. The National Flood Insurance Program (NFIP), administered by the Federal Emergency Management Agency (FEMA), is the only insurance broadly available for flood coverage in most parts of the nation. Flood insurance is required on loans secured by properties located or to be located within Special Flood Hazard Areas, which encompass many coastal and waterfront communities.

In an effort to ensure continuation of the NFIP despite a government shutdown, Congress approved a short-term extension until May 31, 2019. However, on Wednesday, FEMA announced that the NFIP will now have “limited ability” to issue new policies, issue increased coverage on existing policies, or issue renewal policies UNTIL Congress moves to end the shutdown and reset funding for FEMA. FEMA did not define “limited ability” or indicate how long this change would be in effect. FEMA also said NFIP insurance policies that were in force before midnight on Dec. 21, 2018 remain in force and claims under those policies will be paid.

Ricky K. Patel writes:

“The most immediate effects of FEMA’s decision will be felt by home buyers and sellers who need federally backed flood insurance to close property deals. Any real estate closings requiring NFIP insurance will be on hold during the shutdown. Based on the government response to the shutdown in 2013, the Federal Emergency Management Agency (FEMA), part of the Department of Homeland Security, will continue any disaster efforts it has underway, since those are funded out of a special disaster relief fund and not annual appropriations”

The latest May 2019 extension is the tenth since the long-term approval for the program expired on Sept. 30, 2017. Lawmakers have put off a significant overhaul of the program, instead opting for stop-gap funding measures as they attempt to resolve the program’s growing debt problem. Critics of the program and lawmakers from flood-prone areas whose constituents depend on its coverage have remained far apart on how to overhaul the NFIP. As of May 2018, the NFIP had over 5 million flood insurance policies providing over $1.28 trillion in coverage. The program collects about $3.6 billion in annual premium revenue. We will continue to monitor the situation so check back for additional information.