With hurricane season underway, and Congress still negotiating a continuing resolution to fund the federal government, insurance agents should be prepared for the possibility of a lapse in the National Flood Insurance Program. Currently, the NFIP is set to expire Tuesday, Sept. 30, 2025.
A short-term flood extension bill has been attached to the stalled CR, raising concerns about what could happen if lawmakers don’t act in time.
So, what do agents need to know—and communicate with their clients—if the NFIP lapses? Let’s discuss.
What is an NFIP lapse?
The NFIP is a federally established program administered by the Federal Emergency Management Agency. For the NFIP to function, Congress must authorize both its existence and its operations. Ideally, this authorization occurs through long-term legislation, such as the five-year extension enacted in 2012. However, since the expiration of that long-term authorization in 2017, Congress has reauthorized the NFIP on a short-term basis—none longer than one year. That has resulted in more than 30 reauthorizations since 2017.
An NFIP lapse occurs when Congress fails to reauthorize the program before its expiration date. During a lapse, FEMA cannot issue new flood insurance policies, certain policy changes and renewals may be restricted, and while claims on existing policies still can be paid, the program’s operations are limited significantly.
Although past lapses typically have been short-lived, even a brief disruption can create confusion for agents and policyholders alike.
Impact on existing policies
If the NFIP lapses, policies already in force remain active and claims will continue to be paid. However, agents should be aware that:
- Policies up for renewal may be processed if payment was received before the lapse. If not, the renewal may be delayed until the program is reauthorized.
- Endorsements that increase coverage or add new property cannot be processed during a lapse.
Impact on new policies
During a lapse, no new NFIP policies can be issued—whether through Write-Your-Own carriers or directly through FEMA. Applications submitted before the lapse still may be processed, but only if payment was received prior to the lapse.
Agents should avoid quoting or binding new flood policies until the program is reauthorized. This can be especially challenging for clients in flood-prone areas or those facing real estate closings.
Impact on policies in the waiting period
The NFIP imposes a standard 30-day waiting period before coverage takes effect. If a lapse occurs during this waiting period, coverage will not begin until the program is reauthorized.
Example:
A homeowner applies for flood insurance on Sept. 15 and submits payment. The 30-day waiting period would normally end on Oct. 15. If the NFIP lapses on Oct. 1 and it is not reauthorized until Oct. 20, the policy will not go into effect until Oct. 20—not Oct. 15. This delay can leave property owners exposed during critical periods.
Commercial flood insurance considerations
Commercial properties are subject to the same limitations during a lapse. Business owners seeking coverage for new locations or expansions will face delays.
Example:
A small-business owner plans to open a new storefront in a designated flood zone and applies for coverage. If the NFIP lapses before the policy is issued, the business owner cannot obtain coverage until the program resumes—potentially delaying opening or leaving the property uninsured.
What agents can and can’t do during a lapse
Agents can continue to provide service to existing policies and to assist clients with claims.
However, they cannot issue new policies, quote or bind coverage, or process endorsements that increase coverage.
What comes next
While the NFIP lapses are disruptive, agents play a critical role in keeping clients informed and protected.
PIA Northeast will continue to monitor legislative developments and to provide updates as needed. In the meantime, agents should be ready to explain the implications of a lapse and reassure clients that existing coverage remains intact.
FEMA has also issued its own guidance in case the NFIP lapses.
Bradford J. Lachut, Esq.
Bradford J. Lachut, Esq., joined PIA as government affairs counsel for the Government & Industry Affairs Department in 2012 and then, after a four-month leave, he returned to the association in 2018 as director of government & industry affairs responsible for all legal, government relations and insurance industry liaison programs for the five state associations. Prior to PIA, Brad worked as an attorney for Steven J. Baum PC, in Amherst, and as an associate attorney for the law office of James Morris in Buffalo. He also spent time serving as senior manager of government affairs as the Buffalo Niagara Partnership, a chamber of commerce serving the Buffalo, N.Y., region, his hometown. He received his juris doctorate from Buffalo Law School and his Bachelor of Science degree in Government and Politics from Utica College, Utica, N.Y. Brad is an active Mason and Shriner.
