Cancellation Qualifying Reasons/RC 30

Reason Code 30: Insufficient Premium to Retain Coverage

This reason code applies when a policy must be canceled due to insufficient premium to maintain any amount of coverage after deducting applicable fees and surcharges. If the policyholder does not pay the additional premium within the required timeframe, the policy is canceled.

Condition	Details
Eligibility for Cancellation	A policy may be canceled if the insurer determines that the premium received, after deducting all applicable fees and surcharges, is insufficient to provide any amount of coverage, and the policyholder does not pay the additional required premium within 30 days of the underpayment notice.
Effective Date of Cancellation	The policy effective date.
Policy Terms Eligible for Refund	The term when the insurer discovered the insufficient premium and, if the policy renewed before reformation occurred, the subsequent renewal term.
Type of Refund	A full refund, including surcharges and fees, applies unless a claim was paid before discovery of the insufficient premium. If a claim was paid, the insurer must contact FEMA for further underwriting and claims guidance.
Required Documentation	A copy of the underpayment notice sent due to policy reformation and documentation showing the original coverage amount and premium paid.

This table can be seen on pages 6-11 and 6-12 of the FIM.

Additional Guidance

• The policyholder must be given an opportunity to pay the additional required premium within 30 days before cancellation is processed.
• If the underpayment is due to an incorrect geolocation or flood zone, this cancellation code does not apply. Instead, the policyholder receives the originally requested coverage amount without paying additional premium for the portion of the policy term before the discovery date.
• If a claim has already been paid before the underpayment was discovered, the insurer must seek FEMA guidance before processing the cancellation and refund.

Required Documents

To process this cancellation reason, underwriters must verify the documentation provided.

• Copy of the underpayment notice issued due to policy reformation.
• Documentation confirming the original premium amount and coverage requested.

Document Gallery

• Underpayment Notice: Notification to the policyholder regarding insufficient premium.
• Premium and Coverage Records: Verification of the original premium and coverage details.

Scenarios for Context

Scenario 1:
A homeowner purchases a flood insurance policy, but an error in the rating process results in an underpayment. The insurer notifies the policyholder of the additional amount due, but they fail to pay within 30 days. The insurer cancels the policy effective the original policy date and issues a full refund.

Scenario 2:
An underwriter discovers that after deducting surcharges and fees, the remaining premium is insufficient to provide any level of coverage. The policyholder does not provide the additional funds, and the policy is canceled with a full refund issued.

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