Today we are talking about flood insurance policy transfers or flood insurance policy assumptions. What are they? How can they be beneficial? What are the negatives about them? We're going to discuss those a little bit today.

First of all, generally a policy transfer or a policy assumption is when a national flood insurance policy is moved from one property owner to the next, FEMA also calls it a policy assumption. Many other people refer to them as policy transfers. Let's talk about some of the benefits of them. How can they help property owners?

Some of the benefits of doing a policy transfer is, for example, let's say that a flood zone on a certain property has recently changed to a much higher risk zone. Then what happens is a policy transfer locks in the current rate for what the property owner has. So if that property owner took out a flood policy before the flood insurance map changed or they've had that policy a while then those rates are locked in. This is one way to get that preferred flood insurance policy through continuous coverage, because by doing a policy transfer, as I said, it locks that rate to what it's currently at.

One of the other benefits is, if you're the individual that's buying the property, since those premiums are already paid up until the renewal, you're not going to have pay anything until renewal. So if you're closing on a home then this could significantly save you on closing costs.

Some of the negatives that we want to talk to about really is on the seller side. Let's just say you're the individual that's wanting to transfer your policy because you're selling your house. What are some of the positives? What are some of the negatives?


Well, the positives is, it gives that new property owner that rate that you currently have, which could be very beneficial. Let's just say if your neighbor's paying $1,500 a year for flood insurance in Birmingham Alabama where flood maps recently changed, but your flood policy is only $550 a year, then this might help you to sell your property a little bit quicker.  Some of the negatives is, though, since flood insurance is paid in full every year, when you do a policy transfer and you're the current owner, you will lose these premiums. So that is one negative you have to look at.

Some people would not think that's that big of a deal, because they're trying to sell their house, but if you've just paid $8,000, $9,000, maybe even $10,000 on a flood policy, then that can be a big difference. These were some of the negatives. Generally, though, when it comes to these policy transfers and it comes to policy assumptions, these typically are only done through the National Flood Insurance Program, and there are certain forms that have to be filled out.

It's generally three pages that you have to fill out to get this transferred. One of the things that you have to verify is that it's your primary residence. Let's just say that you're selling that house and you're trying to transfer that policy.  It's a rental house for you, but the person buying it is going to be using it as their primary residence then you may not necessarily be able to do a policy transfer because it's going to be a different type of policy.  FEMA rates rental properties differently compared to primary residence policies.

To get a better understanding of that, you can watch one of our earlier videos or read some of our blogs about the differences in flood insurance between rental properties and primary residences. So these are some things to think about, but on these forms, once thy are filled out and are turned into the flood carrier then the flood carrier can send over proof of coverage to the mortgage company showing that the policy's been transferred, and this should be able to be done fairly quickly.

So if you've got questions about how to do a policy transfer, is a policy transfer right for you, or you just got more questions about flood insurance, please reach out to us, floodinsuranceguru.com. You can go to our YouTube or our Facebook channel, The Flood Insurance Guru, where we do our daily educational videos, or you can give us a call 205-451-4294. Also, don't forget to click the link below to learn more about how we might be able to help you. 

Chris Greene

Author

Chris Greene

President of The Flood Insurance Guru
M.S. in Emergency Management with a focus in Flood Mitigation
flood@communityfirstagency.com