Do National Flood Insurance Program (NFIP) policies provide a 30-day or 45-day grace period after the policy expiration date? Did the CARES Act extend the grace period to 120 days? We are trying to address the 45-day gap between notifying the borrower that their flood insurance has lapsed and force placement.

Yes, we believe that NFIP policies typically have a thirty-day grace period and that the grace period was extended to one hundred twenty days for policies that expired between February 13, 2020, and June 15, 2020. Additionally, the newly released 2022 Interagency Q&As Regarding Flood Insurance state that lenders may address a gap in coverage between a flood insurance policy’s lapse and force-placement by purchasing private portfolio-wide coverage and lenders may force place insurance and charge borrowers at any time starting from the date on which flood insurance coverage lapses.

The NFIP’s official website states that NFIP flood insurance policies provide a thirty-day grace period during which loss claims will be honored, provided that the full renewal premium is paid by the end of the thirty-day grace period. The Federal Emergency Management Agency (FEMA)’s Bulletin W-20002 temporarily extended this thirty-day grace period for receipt of renewal payment to one hundred twenty days after expiration for policies with expiration dates between February 13, 2020, and June 15, 2020.

Regarding the gap in flood insurance coverage that can result from the thirty-date grace period (which is not long enough to cover the forty-five day notice period before forced placement), the 2022 Interagency Q&As Regarding Flood Insurance state that “[w]hen a flood insurance policy has expired and the borrower has failed to renew coverage, insurance policies providing portfolio-wide coverage may be useful protection for the lender for a gap in coverage in the period of time before a force-placed policy takes effect.” However, lenders “may not rely on an insurance policy that provides portfolio-wide coverage as a substitute for a force-placed policy.”

The Interagency Q&As also state that a lender “may force place flood insurance and charge the borrower for the cost of premiums and fees incurred by the lender or servicer in purchasing the flood insurance on the borrower’s behalf at any time starting from the date on which flood insurance coverage lapsed or did not provide a sufficient coverage amount.” This means that a lender “would not have to wait 45 days after providing notification to force place insurance.”

For resources related to our guidance, please see:

NFIP, Understanding Your Policy Terms (“NFIP flood insurance has a policy term of one year. All policies expire at 12:01am on the last day of the effective term, but you remain covered for 30 days after the expiration. Claims for losses that occur in this grace period will be honored, provided that the full renewal premium is paid by the end of the 30-day grace period.”)

FEMA, Bulletin W-20002 – Extension of the Grace Period for Payment of National Flood Insurance Program (NFIP) Premiums Due to COVID-19 Pandemic (March 28, 2020) (“To decrease the chance of a coverage lapse caused by the COVID-19 pandemic, I am extending the 30-day grace period for receipt of the renewal payment after a policy’s expiration date. If a policy has an expiration date between February 13, 2020, and June 15, 2020, then the NFIP insurer must receive the appropriate renewal premium within 120 days of the expiration date to avoid a lapse in coverage.”)

Interagency Q&As Regarding Flood Insurance, 87 Fed. Reg. 32826, 32870, Applicability 14 (May 31, 2022) (“May a lender rely on an insurance policy providing portfolio-wide coverage to meet the flood insurance purchase requirement or the force placement requirement under the Regulation? It depends. . . . When a flood insurance policy has expired and the borrower has failed to renew coverage, insurance policies providing portfolio-wide coverage may be useful protection for the lender for a gap in coverage in the period of time before a force-placed policy takes effect. However, even if a lender has portfolio-wide coverage to address gaps, the lender must still ensure the flood insurance purchase requirement is satisfied at the time a loan is made, increased, renewed or extended, and the lender must still force place coverage on the borrower’s behalf in a timely manner, as required, and may not rely on an insurance policy that provides portfolio-wide coverage as a substitute for a force-placed policy. . . .”)

Interagency Q&As Regarding Flood Insurance, 87 Fed. Reg. 32826, 32890–32891, Force Placement 9 (May 31, 2022) (“When may a lender or its servicer charge the borrower for the cost of force-placed insurance? A lender, or a servicer acting on its behalf, may force place flood insurance and charge the borrower for the cost of premiums and fees incurred by the lender or servicer in purchasing the flood insurance on the borrower’s behalf at any time starting from the date on which flood insurance coverage lapsed or did not provide a sufficient coverage amount. The lender or servicer would not have to wait 45 days after providing notification to force place insurance. . . .”)

Interagency Q&As Regarding Flood Insurance, 87 Fed. Reg. 32826, 32890, Force Placement 7 (May 31, 2022) (“A lender, however, may not require the borrower to pay for double coverage. The Regulation requires the lender or its servicer to refund to the borrower all premiums paid by the borrower for any force-placed insurance purchased by the lender or its servicer during any period in which the borrower’s flood insurance coverage and the force-placed insurance policy were each in effect.”)