The Flood Insurance Guru Podcast Episode 11: What's a Policy Transfer?

It's not you, it's me and my policy needing to be transferred to someone else.

Today, we're going to cover flood insurance policy transfer or assumption of a policy for a property, what it really is, how FEMA is involved, possible costs, and what you should generally know as a property owner.

To start, this flood insurance policy is specific to any National Flood Insurance Program policy. Say, you're purchasing a property or a house from a previous owner with a flood insurance policy attached to the house, what they want to do is to transfer that policy from their bucket to you instead of closing it.

Why would we do this?

Well, there's a lot of benefits for this type of transfer and your assumption of the current flood policy. There's a significant difference between a policy transfer and purchasing a new one. It's important to note that FEMA will grant you continuous coverage for the property which is a big discount for the time being. This also means that the transferred policy will keep the flood zone it was in. For example, if the policy was purchased at a time where the property is in a low risk flood zone, then you'll get the flood insurance rates for that type of zone even if the property is already moved to a high risk flood zone.

This in turn allows you to benefit from the existing policy while being smart with your money by avoid cost of a new flood insurance purchase, dealing with flood insurance premiums, and getting an updated elevation certificate.

How would we do this?

First step is to make sure that you reach out to the company that wrote or purchased the flood insurance to make sure it's available since there are companies in the National Flood Insurance Program (NFIP) and FEMA who don't accept policy transfers and assumption.

You also have to remember that this is only available for NFIP policies which simply means that if the previous property owner has flood insurance from Private Insurance Companies, then the policy transfer or assumption won't be available for you. This is also the same with forced-placed flood insurance policy from your bank because generally the policy in force is for the specific loan in the mortgage of the previous owner.

Now, the only downside we could think of doing this is because of how flood insurance policies are purchased. Basically, you're most likely to have paid your policy in full and once  you transfer it, you're going to have to accept the fact that you paid for the insurance for the whole year even if you're no longer the property owner.

This can still be good if you're the type of person who values making sure that everything's alright especially for the buyer since flood insurance coverage is already available for them and it also protects the property's grandfathering rate. This can also get you good deals when selling your house since flood insurance coverage isn't really included in any homeowners insurance policy, so it's a plus for them.

I actually bought my house that's in a high risk flood zone which I didn't realize until 2 weeks before closing. I was told that this is going to cost me $4000 per year and every deal in the house started to fall apart because of this. I did what I know best and researched on the property. We found out that the house was built in compliance to 1982 and we're also able to use the original flood map which lowered the flood insurance rate to $350 per year. We've actually done four policy transfers for this property and all of them retained that preferred status, the grandfathered status, and the rate I was able to calculate. 

This can be the same for your property as long as there's no lapse in the policy. Policy transfer is really simple as well since this is basically a paper you need to fill-up and sign, so if you have any question on policy transfer, assumption, are they the best fit or not, or anything about flood, please click the link below to reach out to us.

Remember, we have an educational background in flood mitigation and we want to help you keep your property's value for long term, so that you're prepared when crap happens.