NATIONAL FLOOD INSURANCE PROGRAM INSTALLMENT PAYMENT PLAN
FEMA has recently published a final rule that will revise the NFIP’s regulations to offer policyholders the option to pay flood insurance premiums in monthly installments. The rule will become effective December 31, 2024, and will bring FEMA regulations into compliance with statutory mandates. In 2012, the Biggert-Waters Flood Insurance Reform Act (“BW-12”) amended the National Flood Insurance Act (“NFIA”) to require FEMA to provide NFIP policyholders who are not required to escrow their premiums the option to pay annually or in more frequent installments. In 2014, the Homeowner Flood Insurance Affordability Act further amended the BW-12 requirement by updating the language to require FEMA to allow premium payments to be made annually or monthly.
Currently, the regulation requires policyholders to pay their annual premium in full at the time of application or renewal, which may be financially difficult for some policyholders. The new rule is expected to reduce financial barriers for policyholders and promote continued retention of flood insurance.
Below are some highlights from of the new rule:
- The regulation will be revised to allow payment of either the full annual premium or monthly payments. The first monthly payment will also include surcharges, fees and assessments, which FEMA categorizes separately from the policy premium amount.
- Only policyholders not required to escrow flood insurance premiums will be eligible for the monthly installment option.
- Residential and non-residential SFIP policyholders will be eligible for the monthly installment option.
- If the policyholder misses any of the monthly payments, FEMA will require them to pay the entire premium upfront for the next policy period.
- If a claim is made prior to the policyholder paying the premium balance in full through their monthly installments, they must either pay the remaining premium balance to receive the full benefits of the claim, or the remaining balance may be settled out of claim proceeds.
- These updates will also apply to Write Your Own (“WYO”) companies who will now be required to offer premium payment plans in accordance with the regulations.
Proctor Loan Protector will continue to monitor this topic and provide updates as they develop.