NFIP Cancellations

This page is a rough draft and will need more work before it's finalized.

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

Unlike general insurance practices, where a signed "lost policy release" form typically allows a policyholder to cancel their insurance, the National Flood Insurance Program (NFIP) has a more structured process. Here's what agents need to know about NFIP cancellations:

1. Key Differences from Lost Policy Release

• Documentation Requirements: NFIP cancellations require specific supporting documents to justify the reason for cancellation. A simple signed request from the policyholder is not sufficient.
• Reason Codes: NFIP uses predefined cancellation reason codes, each with its own conditions, refund rules, and required documentation.

2. Steps for Processing NFIP Cancellations

1. Identify the Cancellation Reason Code

  * Select the appropriate reason code from the NFIP’s list. Examples include "No Insurable Interest," "Duplicate Coverage," and "Invalid Payment."
  * Each reason code outlines specific requirements and eligibility criteria.

1. Gather Supporting Documentation

  * Examples include:
    * Proof of property sale (e.g., bill of sale, closing disclosure).
    * Evidence of duplicate coverage (e.g., declarations page of the second policy).
    * Statements from lenders showing insurance is no longer required.

1. Determine Refund Eligibility

  * Refunds vary based on the cancellation reason:
    * Full Refunds: For cases like duplicate non-NFIP coverage or policies nullified before their effective date.
    * Pro-Rated Refunds: For partial-term cancellations, excluding certain fees.
    * No Refunds: In cases of fraud, misrepresentation, or continuous lake flooding.

1. Ensure Proper Signatures

  * Policyholder and/or agent signatures are generally required.
  * Exceptions exist for specific codes, such as fraud, invalid payment, and certain ineligible property scenarios.

1. Submit the Cancellation Request

  * Include all required documentation and ensure it is submitted promptly.
  * If additional information is requested, submit it within 60 days to retain the original receipt date.

1. Provide Notice to Interested Parties

  * NFIP requires insurers to notify additional policyholders, lenders, loss payees, or disaster assistance agencies about the cancellation.

3. Special Considerations for Agents

• Policies with Claims: Open claims prevent cancellation. Closed claims limit refund eligibility based on specific reason codes.
• Eligibility Rules: Some properties may lose eligibility mid-term, such as those in communities suspended from the NFIP.
• Lender Requirements: Lenders may impose requirements beyond federal regulations. Ensure proper documentation if a lender no longer requires flood insurance.

4. Documentation and Refund Handling

• Refunds must account for fees and surcharges. In some cases, FEMA reviews multi-term cancellations or refunds involving paid claims.
• Agents must understand refund calculations and guide policyholders on eligibility.

By following these structured steps, agents can navigate the NFIP’s cancellation process effectively, ensuring compliance while addressing policyholder concerns.