Duplicate Policies: Difference between revisions

Latest revision as of 08:19, 11 December 2024

The National Flood Insurance Program (NFIP) prohibits the duplication of policies on the same building or property for the same type of coverage. [1] This rule is designed to prevent overlapping insurance, ensuring efficient claims handling and compliance with program guidelines. However, specific circumstances and exceptions may apply. Below is an overview of NFIP’s rules and processes regarding policy duplication.

Non-duplication

Generally speaking, only one flood insurance policy may provide building coverage for a policyholder on one building. Multiple policies can divide building coverage and contents coverage when there are clear cases of separate insurable interests. Single structures can also divide coverage due to additions or extensions.

Exceptions

While the NFIP generally prohibits duplicate coverage, there are limited exceptions where duplicate policies may coexist:

Residential Condominium Building Association Policy (RCBAP): A unit owner may purchase a Dwelling Form policy with building coverage in addition to the RCBAP coverage for the entire building. However, the combined building coverage cannot exceed $250,000 for the unit (or the total cost of the building divided by the number of building units).
Excess Coverage: In cases where the NFIP policy limits are less than the Building Replacement Cost Value, non-NFIP flood insurance can be issued in conjunction with an NFIP policy that provides maximum coverage.

Identification and Resolution of Duplicate Policies

Insurers must follow these steps to identify and resolve duplicate policy issues:

Notification: The insurer must notify the policyholder(s) in writing upon discovering duplicate coverage. The notice must:
- Advise the policyholder(s) of the duplication.
- Explain the need for cancellation and the steps involved.
Policyholder Choice: If two policies have the same effective date, the policyholder may choose which policy remains active.
Documentation: Insurers must maintain detailed records to document the cancellation process and avoid disputes.

Cancellation of Duplicate Policies

When duplicate coverage is identified, one of the policies must be canceled. This process is managed through specific cancellation codes, which outline the reasons and procedures for cancellation.

Reason Code 04: Duplicate NFIP Policies

Applies when two NFIP policies exist for the same building.
Effective Date: The later policy’s effective date.
Refunds: A refund may be issued for the canceled policy, subject to NFIP refund rules.

Reason Code 26: Duplicate Policy from Another Source

Applies when the policyholder has a duplicate policy issued by a non-NFIP insurer.
Effective Date: The NFIP policy’s effective date is nullified.
Refunds: The policyholder may be entitled to a refund for the canceled NFIP policy.

This page contains information about the NFIP. Find more NFIP Resources.

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-Duplicate Policies
+The [[National Flood Insurance Program]] (NFIP) prohibits the duplication of policies on the same building or property for the same type of coverage. [https://www.fema.gov/sites/default/files/documents/fema_nfip_flood-insurance-manual_042024.pdf#page=37] This rule is designed to prevent overlapping insurance, ensuring efficient claims handling and compliance with program guidelines. However, specific circumstances and exceptions may apply. Below is an overview of NFIP’s rules and processes regarding policy duplication.
+== Non-duplication ==
+Generally speaking, only one flood insurance policy may provide building coverage for a policyholder on one building. Multiple policies can divide building coverage and contents coverage when there are clear cases of separate insurable interests. Single structures can also divide coverage due to [[NFIP Additions and Extensions|additions or extensions]].
+=== Exceptions ===
+While the NFIP generally prohibits duplicate coverage, there are limited exceptions where duplicate policies may coexist:
+* '''Residential Condominium Building Association Policy (RCBAP):''' A unit owner may purchase a Dwelling Form policy with building coverage in addition to the RCBAP coverage for the entire building. However, the combined building coverage cannot exceed $250,000 for the unit (or the total cost of the building divided by the number of building units).
+* '''Excess Coverage:''' In cases where the NFIP policy limits are less than the [[Building Replacement Cost Value]], non-NFIP flood insurance can be issued in conjunction with an NFIP policy that provides maximum coverage.
+=== Identification and Resolution of Duplicate Policies ===
+Insurers must follow these steps to identify and resolve duplicate policy issues:
+# '''Notification:''' The insurer must notify the policyholder(s) in writing upon discovering duplicate coverage. The notice must:
+#* Advise the policyholder(s) of the duplication.
+#* Explain the need for cancellation and the steps involved.
+# '''Policyholder Choice:''' If two policies have the same effective date, the policyholder may choose which policy remains active.
+# '''Documentation:''' Insurers must maintain detailed records to document the cancellation process and avoid disputes.
+=== Cancellation of Duplicate Policies ===
+When duplicate coverage is identified, one of the policies must be canceled. This process is managed through specific cancellation codes, which outline the reasons and procedures for cancellation.
+==== Reason Code 04: Duplicate NFIP Policies ====
+* Applies when two NFIP policies exist for the same building.
+* '''Effective Date:''' The later policy’s effective date.
+* '''Refunds:''' A refund may be issued for the canceled policy, subject to NFIP refund rules.
+==== Reason Code 26: Duplicate Policy from Another Source ====
+* Applies when the policyholder has a duplicate policy issued by a non-NFIP insurer.
+* '''Effective Date:''' The NFIP policy’s effective date is nullified.
+* '''Refunds:''' The policyholder may be entitled to a refund for the canceled NFIP policy.
+{{nfip}}