Cancellation Qualifying Reasons/RC 01

Reason Code 01: Building Sold, Removed, or Destroyed

This reason code applies when the policyholder no longer has an insurable interest in the building due to a sale, transfer, removal, or destruction of the insured structure. This includes situations such as a completed property sale, foreclosure, or physical removal of the building from its original location.

Condition	Details
Eligibility for Cancellation	The policyholder had an insurable interest during the policy term but no longer does due to sale, removal, or destruction.
Effective Date of Cancellation	The date the policyholder ceased to have an insurable interest (e.g., closing date, demolition date, foreclosure date).
Policy Terms Eligible for Refund	The term in which the policyholder lost insurable interest and subsequent renewed terms, up to 5 years prior to the cancellation request.
Type of Refund	Pro-rata refund (excluding Federal Policy Fee and Probation Surcharge) for the canceled term. Full refund, including surcharges and fees, for eligible renewed terms.
Required Documentation	Evidence of sale, transfer, removal, or destruction, such as a bill of sale, settlement statement, closing disclosure, proof of demolition, or foreclosure court documents.

This table can be seen on pages 6-2 and 6-3 of the FIM.

Additional Guidance

• If there was an open claim at the time of the sale or destruction, the policy cannot be canceled.
• If a policyholder sells the building but remains listed as a named insured under the new owner’s policy, the original policy may need to be adjusted rather than canceled.
• Cancellation requests missing adequate proof of sale, removal, or destruction may lead to processing delays.

Required Documents

This reason code is straightforward: if the insured no longer owns or has any financial interest in the building, the policy can be canceled. However, the effective date should align with the supporting documentation.

• If the policyholder sold or transferred ownership, the effective date should match the closing date on the settlement statement or deed transfer.
• If the structure was demolished or relocated, a government permit or contractor verification may be required.
• Foreclosure cases should have court documentation or confirmation from the lender.

Documentation for Specific Circumstances

Reason Code 01 encompasses diverse situations that involve loss of insurable interest in a previously owned structure. The table below lists documents accepted by the NFIP, some of which contain links to more specific resources.

Circumstance	Acceptable Documents as Proof
Sale or Transfer	Bill of Sale, Settlement Statement, Closing Disclosure
Removal	Proof of Removal, Relocation Permit
Destruction or Demolition	Proof of Demolition, Contractor Statement, Fire Department Report
Foreclosure	Court Documentation, Bank/Lender Confirmation
Inheritance/Death	Legal Documents showing ownership transfer upon policyholder’s death

Scenarios for Context

Scenario 1:
A homeowner sells their house, and the new owner obtains their own flood insurance policy. The seller submits a cancellation request with a closing disclosure statement, and the policy is canceled effective the date of the sale.

Scenario 2:
A mobile home park removes an old unit from the premises. The policyholder provides proof of removal, and the underwriter processes a cancellation effective the date of removal.

This page contains details about NFIP Cancellations. Find more in the How To Cancel section of the NFIP Flood Insurance Manual.