Getting a FEMA flood policy can be confusing. Trying to figure out what is covered and what isn't covered can be frustrating. The cancellation process can be even more confusing. 26 cancellation rules for 26 different cancellation reasons that just sounds like a headache. It can feel like trying to figure out the tax code and who wants to do that.
So we want to talk about what rules are active, which rules are inactive, what rule applies to what scenario, what documentation is needed, are you getting a refund?
You see its already getting confusing and you just want to throw your hands in the air and say.... forget it.
Well over the next 26 blogs we want to break down each rule for you and make it as easy as possible.
How do you make FEMA rules easy to understand? Well hopefully we can find a way to get us both through these rough waters.
So let's get into FEMA cancellation reason 1 or code 1. This rule particular rule is talking about 4 scenarios for a building when its
On each one of these scenarios we want to discuss the following
- Valid reasons
- Documentation needed
- Cancellation date and request
- Type of refund
So let's look at a building being sold. You have had your house listed for almost a year. You have finally made it past the obstacle of flood insurance being required and things being needed to be fixed on the house. You just left the closing table and it's time for the next chapter of your life.
Can you finally cancel the flood insurance? Maybe
Let's talk about it. As mentioned before you just walked a way from the closing table and the house is no longer yours. This means you no longer of an insurable interest in the property.
What exactly does that mean?
It means that if something happens to the property it no longer impacts you.
According to FEMA this qualifies as a valid reason to cancel your flood insurance.
The next two important questions
- What documentation is needed?
- Are you getting a refund?
Since the property was sold you have two options for documentation. Either a bill of sale or a loss settlement. This documentation will actually show that a transaction took place. This shows FEMA that your insurable interest is gone.
The next thing that is needed is a signed cancellation letter needs to be sent in to FEMA with the effective date the property is sold. Its best yo have your signature as well as the insurance agents signature this will stop any further delays.
So once these things are sent in then a refund should be issued generally within 30 days.
So what kind of refund will it be?
It will be a prorated refund based on the effective date of the cancellation. So if you have had the policy for 6 months then you should get 6 months of refund back.
Now that we have talked about if a building is sold lets look at some other reasons that fall under reason or code 1 of the FEMA cancellation reasons.
So what if a building is removed, what exactly does this mean?
Generally when a building is removed its being relocated to another location.
When it comes to documentation on a building being removed you can generally get a letter from the courthouse stating it was moved and where it was removed.
So do the same cancellation rules and refund rules apply here?
Yes the cancellation date is the date the building was relocated and you will be getting a prorated refund based on this date.
What if a building is destroyed?
A building being destroyed is valid reason for cancelling a FEMA policy but what kind of documentation can be provided?
Well if it is a result of an insurance claim you can get a copy of a total loss letter.
This is a letter from the insurance company that states that the building is a total loss.
If it was destroyed for other reasons you can also submit photographs showing the building is no longer there.
So we have talked about if a building is sold, removed and destroyed, but what about altered.
A building being physically altered is very important when it comes to cancelling a FEMA policy. FEMA has strict eligibility guidelines on what is considered a building.
So what exactly would a physical alteration be?
Well a good example is a mobile home that is on a permanent foundation. If the foundation type changes or it is removed from the foundation then the building is no longer eligible for National Flood Insurance Program.
Do the cancellation and refund processes work the same way on altered buildings.
Yes like buildings that are sold, removed, or destroyed altered buildings use an effective cancellation date on the date these changes took place. It also qualifies these property owners for a prorated refund.
As you can see under reason or code 1 of the FEMA cancellation reasons there are some unique situations on buildings that have been sold, removed, destroyed, or altered.
In these situations it's crucial that you understand the valid reasons, effective cancellation date, type of refund, and documentation needed. FEMA is very strict on this process and you want to make sure your cancellation does not get delayed.
Make sure to tune into our next blog when we discuss reason or code 2 contents that are sold, removed, or destroyed.
If you have further questions about FEMA cancellation reason or code 1 make sure to visit our website. You can also check out each one of these reasons on our YouTube channel The Flood Insurance Guru. You can also tune into our daily flood education videos on our Facebook page The Flood Insurance Guru or catch our daily podcast.