Cancellation Qualifying Reasons/RC 28: Difference between revisions
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=== Reason Code 28: Insurance No Longer Required by Lender === | === Reason Code 28: Insurance No Longer Required by Lender === | ||
This reason code applies when a policyholder was originally required to maintain flood insurance by a lender<ref | This reason code applies when a policyholder was originally required to maintain flood insurance by a lender<ref><small>''For all instances of this cancellation reason, the use of the name "lender" should be interpreted as any third-party that has mandated the policyholder's purchase of an NFIP policy.''</small></ref>, but the lender no longer requires coverage due to a loan payoff, map revision, or other circumstances. | ||
<references | <references /> | ||
{| class="wikitable" | {| class="wikitable" | ||
!'''Condition''' | !'''Condition''' | ||
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|- | |- | ||
|'''Required Documentation''' | |'''Required Documentation''' | ||
|In lieu of a signed cancellation request, a signed statement from the policyholder that the lender no longer requires a flood policy. <ref name="docs">'''This sentence from the FIM has created a lot of confusion since it was introduced.'''<br>If a completed Cancellation Verification Letter (or an acceptable substitute, as shown below) is signed by all named insureds and the agent of record, then no additional Cancellation Request form is required.</ref> | |In lieu of a signed cancellation request, a signed statement from the policyholder that the lender no longer requires a flood policy. <ref group="§" name="docs">'''This sentence from the FIM has created a lot of confusion since it was introduced.'''<br>If a completed Cancellation Verification Letter (or an acceptable substitute, as shown below) is signed by all named insureds and the agent of record, then no additional Cancellation Request form is required.</ref> | ||
|} | |} | ||
''This table can be seen on page 6-10 of the {{FIM|172}}.'' | ''This table can be seen on page 6-10 of the {{FIM|page=172}}.'' | ||
==== How to Determine the Effective Date ==== | ==== How to Determine the Effective Date ==== | ||
This is the only NFIP Reason Code that is cancelled on the date that the cancellation document is received by the insurer. [https://www.fema.gov/sites/default/files/documents/fema_nfip_flood-insurance-manual_042024.pdf#page=163] | This is the only NFIP Reason Code that is cancelled on the date that the cancellation document is received by the insurer. [https://www.fema.gov/sites/default/files/documents/fema_nfip_flood-insurance-manual_042024.pdf#page=163] | ||
Two elements are required for this qualifying reason:<ref name="docs" /> | Two elements are required for this qualifying reason:<ref group="§" name="docs" /> | ||
* A completed [[NFIP Cancellation Request|Cancellation Request]] signed by all named insureds and the agent. | * A completed [[NFIP Cancellation Request|Cancellation Request]] signed by all named insureds and the agent. | ||
* A statement confirming that any third-party requirement to maintain NFIP coverage has been removed. | * A statement confirming that any third-party requirement to maintain NFIP coverage has been removed. | ||
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== Required Documents == | == Required Documents == | ||
For this Reason Code, the FIM states for required documentation ''"In lieu of a signed cancellation request, a signed statement from the policyholder confirming that the lender no longer requires flood insurance."'' | For this Reason Code, the FIM states for required documentation ''"In lieu of a signed cancellation request, a signed statement from the policyholder confirming that the lender no longer requires flood insurance."'' | ||
<references /> | <references group="§" /> | ||
'''The preferred method for verification is a completed [[Cancellation Verification Letter]] signed by the insured.''' | '''The preferred method for verification is a completed [[Cancellation Verification Letter]] signed by the insured.''' | ||
Latest revision as of 08:33, 26 March 2025
Reason Code 28: Insurance No Longer Required by Lender
This reason code applies when a policyholder was originally required to maintain flood insurance by a lender[1], but the lender no longer requires coverage due to a loan payoff, map revision, or other circumstances.
- ↑ For all instances of this cancellation reason, the use of the name "lender" should be interpreted as any third-party that has mandated the policyholder's purchase of an NFIP policy.
| Condition | Details |
|---|---|
| Eligibility for Cancellation | A policy may be canceled if the lender no longer requires flood insurance, such as when the mortgage is paid off, the building is removed from the Special Flood Hazard Area (SFHA) by a FEMA map revision, or the lender waives the requirement. |
| Effective Date of Cancellation | The date the insurer receives the cancellation request. |
| Policy Terms Eligible for Refund | The current policy term. |
| Type of Refund | A pro-rata refund, excluding the HFIAA Surcharge, Federal Policy Fee, and Probation Surcharge. |
| Required Documentation | In lieu of a signed cancellation request, a signed statement from the policyholder that the lender no longer requires a flood policy. [§ 1] |
This table can be seen on page 6-10 of the FIM.
How to Determine the Effective Date
This is the only NFIP Reason Code that is cancelled on the date that the cancellation document is received by the insurer. [1]
Two elements are required for this qualifying reason:[§ 1]
- A completed Cancellation Request signed by all named insureds and the agent.
- A statement confirming that any third-party requirement to maintain NFIP coverage has been removed.
If either of these elements are missing from the received cancellation document, then the insurer will send a notice that requests the missing details. The date the missing information is received by the insurer will determine the cancellation effective date.
- If the missing details are received within 60 days of the insurer's initial notice, then the cancellation effective date will be the date the insurer received the first cancellation document.
- If the missing details are received more than 60 days of the insurer's initial notice, then the cancellation effective date will be the date the insurer received the missing information.
Required Documents
For this Reason Code, the FIM states for required documentation "In lieu of a signed cancellation request, a signed statement from the policyholder confirming that the lender no longer requires flood insurance."
- ↑ 1.0 1.1 This sentence from the FIM has created a lot of confusion since it was introduced.
If a completed Cancellation Verification Letter (or an acceptable substitute, as shown below) is signed by all named insureds and the agent of record, then no additional Cancellation Request form is required.
The preferred method for verification is a completed Cancellation Verification Letter signed by the insured.
If the Cancellation Verification Letter is not used, the following is acceptable:
- A similarly worded statement from the policyholder that confirms the lender no longer requires flood insurance at the insured property address
- A letter from the lender verifying that coverage is no longer required at the insured property address
FEMA Letters of Map Change (LOMAs, LOMRs, etc) are not necessary for this qualifying reason and should not be accepted in place of a statement that the lender no longer mandates flood insurance coverage. Lenders can require coverage in Non-Special Flood Hazard Areas per their own risk management strategies.
Document Gallery
- Lender Statement: Letter verifying that flood insurance is no longer required.
- Policyholder Signed Statement: Confirmation from the policyholder.
Scenarios for Context
Scenario 1:
A homeowner pays off their mortgage, and the lender no longer requires flood insurance. The policyholder submits a signed cancellation request, and the insurer processes the cancellation with a pro-rata refund.
Scenario 2:
A commercial property owner receives a FEMA Letter of Map Revision (LOMR) indicating that their building is no longer in an SFHA. The lender removes the flood insurance requirement, and the policy is canceled effective the date the insurer receives the request.
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This page contains details about NFIP Cancellations. |