Cancellation Qualifying Reasons/RC 07
Reason Code 07: Property Closing Did Not Occur
This reason code applies when an NFIP policy was issued in anticipation of a property transfer, but the closing did not take place. Since the policyholder never had an insurable interest, the policy must be nullified from inception.
| Condition | Details |
|---|---|
| Eligibility for Cancellation | A policy may be nullified if the property closing did not occur and the policyholder never had an insurable interest. |
| Effective Date of Cancellation | The policy is nullified from the beginning of the policy term. |
| Policy Terms Eligible for Refund | Current policy term only. |
| Type of Refund | A full refund, including surcharges and fees, unless a claim was paid during the policy term. |
| Required Documentation | A signed cancellation request or a signed statement from the policyholder confirming that the closing did not occur. |
This table can be seen on page 6-4 of the FIM.
Additional Guidance
- Since the closing did not occur, the policyholder never had an insurable interest, meaning the policy must be nullified rather than canceled mid-term.
- If a claim has already been paid, the policyholder must return the claim payment before the policy can be nullified.
- This cancellation reason is most commonly used in real estate transactions where insurance was required for an anticipated closing that was later canceled.
Required Documents
To process this cancellation reason, underwriters must verify documentation confirming that the property closing did not take place.
- Signed cancellation request from the policyholder.
- Signed statement from the policyholder confirming the closing did not occur, usually via the Cancellation Verification Letter.
Scenarios for Context
Scenario 1:
A homebuyer purchases an NFIP policy in anticipation of closing on a house, but the transaction falls through. The buyer submits a signed statement confirming the failed closing, and the policy is nullified from inception with a full refund.
Scenario 2:
A lender requires flood insurance before closing a mortgage loan. However, the loan application is denied, and the closing never happens. The policyholder requests cancellation, and the insurer nullifies the policy from inception.
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This page contains details about NFIP Cancellations. |