Can I take over the seller's flood insurance?

What is a flood policy transfer or assumption?

When a home with flood insurance is sold, the buyer can often take over the seller's flood policy instead of starting a new one. The National Flood Insurance Program (NFIP) calls this an assignment. You will also hear it called a transfer or an assumption. The seller signs the assignment on or before the closing date, and the buyer has up to 30 days after closing to send it to the insurer. The assignment takes effect on the day ownership changes hands.

Every NFIP policy with building coverage can be assigned to the buyer. Two kinds of NFIP policies cannot be assigned: a policy that covers only contents, and a policy on a building that is still under construction. Private flood policies are different, because each insurer sets its own transfer rules.

Why take over the seller's flood policy?

For most buyers, taking over the seller's NFIP policy is the better deal. Here is what you get.

• You keep the seller's price. Any discount on the policy moves to you with it. Under Risk Rating 2.0, a new policy is priced at today's full rate unless you qualify for a discount on your own. That is why taking over the policy usually costs less, but not always, so compare both before closing.
• Increases stay slow. The policy keeps its glide path, where the price rises a little each year toward the full rate. For most policies, the yearly increase is capped at 18 percent. The cap is set using your details as the new owner.
• No gap in coverage. The policy keeps going on closing day, so there is no new waiting period and no day without coverage.
• Less to do before closing. There is no new application to fill out, and your lender sees a policy that is already in place.

Assuming is most beneficial when the policy has been in force for more than 3 years, because the glide path has had more time to work.

"I have done this myself. When I sold my home, I was paying the buyer's closing costs. A new flood policy would have come with a much higher premium, and that would have raised the closing costs I was covering. Instead, my buyer took over my flood policy, and it saved me thousands of dollars at closing."

Chris Greene, The Flood Insurance Guru

Watch: how a flood policy assumption works

Chris Greene walks through how taking over the seller's flood policy works, what it costs, and how the 18 percent yearly cap plays out over time.

Buying a rental or investment property?

Here is how one investor kept a lower rate by taking over the seller's policy instead of starting a new one.

How long does it take?

Less time than most buyers expect. The whole transfer comes down to one form and one deadline.

1. Before closing: get a copy of the seller's declarations page and make sure the building coverage meets your lender's requirement.
2. On or before closing day: the seller signs the assignment form, and you sign to accept it.
3. On closing day: the policy becomes yours the day ownership changes hands.
4. Within 30 days after closing: the signed assignment must reach the insurer.
5. If you will live in the home: send proof it is your primary residence, such as your car registration or a homestead filing, so the policy is priced as your main home.

What about the seller's refund?

This is the part most people miss. When a seller cancels their NFIP policy after the sale, they get a refund for the unused part of the policy year. When the seller signs the policy over to you instead, there is no refund, because the policy keeps going for you.

That means the seller has already paid for months you will use. Some sellers will ask to be paid back for those months at closing. Agree on it early with your agent so it does not hold up the deal or surprise anyone at the closing table.

Who this check helps

Buyers

Find out before closing if the seller's policy can move to you, and what to ask for. A copy of the seller's declarations page is the first step.

Sellers

Paying the buyer's closing costs? A new flood policy at today's price raises those costs. When the buyer takes over your policy instead, there may be no new flood premium due at closing at all, and that can save you thousands.

Lenders and loan officers

One question on every file can save your borrower from buying a new policy when a better option was already in place. The check also flags coverage that will not meet the lender requirement, so it can be fixed before closing.

Real estate agents

A flood policy the buyer can take over may make a listing easier to sell and a closing smoother. Share the check with buyers and sellers early in the deal.

What can hold up a transfer?

The coverage amount. The buyer's lender will check that the building coverage meets its requirement. Under federal rules, the minimum is usually the lowest of the loan balance, the most the NFIP offers for the building, or the building's insurable value. Your lender can ask for more, so always check with them.

If the building coverage is short, raise it before the assignment and before closing. Increasing the coverage will increase the price of the policy. An NFIP increase tied to a loan closing can start at closing with no 30 day wait if the insurer gets the request and payment on time.

Does the flood zone matter?

Your flood zone decides whether a lender requires flood insurance. It does not set what you pay. Not sure of the zone? Use our free Flood Zone Check.

Frequently asked questions

Is flood insurance transferable to the new homeowner?

An NFIP policy with building coverage can be assigned to the buyer. A private policy depends on the insurer's rules.

Is it better to assume the seller's NFIP policy or buy a new one?

Usually assuming. Under Risk Rating 2.0, a new NFIP policy is priced at today's full rate unless you qualify for a discount, while an assumed policy keeps the seller's price and glide path. In some cases a new policy can cost the same or less, so compare both before closing.

How long does it take to transfer a flood policy?

One signature and one deadline. The seller signs the assignment on or before closing, the policy becomes yours on closing day, and the insurer must receive the signed form within 30 days after closing.

Does the seller get a refund if the flood policy is transferred?

No. A seller who cancels after the sale gets a refund for the unused part of the policy year. A seller who assigns the policy to the buyer does not, because the policy keeps going. Buyers and sellers can agree to settle those unused months at closing.

Who signs to transfer an NFIP policy?

The seller signs the assignment on or before the closing date. The buyer has up to 30 days after closing to send it to the insurer.

What if the seller's policy does not have enough coverage?

The lender will not accept it as is. Raise the building coverage before the transfer and before closing. Increasing the coverage will increase the price of the policy.

Can a private flood policy be transferred?

It depends on the insurer. Some allow it, some have conditions such as membership rules, and some may not allow it. Ask the insurer in writing and have a backup plan.

Is this a quote?

No. It is a free educational check. A licensed agent can review the actual policy and give you a quote. We can't guarantee price.

This is an educational check based on the details you enter. It is not an insurance quote, an offer of coverage, or a guarantee. Always review the actual policy, speak with a licensed agent, and check with your lender for exact requirements.