Can You Transfer Flood Insurance to a New Owner?

When a property changes hands, questions often arise regarding existing flood insurance coverage. Buyers and sellers frequently inquire if an active flood insurance policy can be transferred to the new owner, or if new coverage must be secured. This article explores the transferability of flood insurance policies during a property sale.

Transferability of Flood Insurance Policies

Policies under the National Flood Insurance Program (NFIP) are generally designed to be assignable to a new owner when a property is sold. This means the current coverage can often be transferred instead of requiring the buyer to purchase a new one. This helps maintain continuous flood protection for the property, ensuring no gaps in coverage. NFIP policies are tied to the insured structure itself, rather than being solely dependent on the original policyholder.

Transferring an NFIP policy allows the new owner to retain the current premium rate, even if flood maps have been updated and would otherwise result in a higher premium for a new policy. Additionally, it eliminates the typical 30-day waiting period that applies to new NFIP policies, ensuring immediate coverage for the buyer at closing. In contrast, private flood insurance policies typically operate under different rules regarding transferability.

Preparing for an NFIP Policy Transfer

To initiate an NFIP policy transfer, specific information and documentation are required from both the seller and the buyer. This includes full names and contact information for both parties, the existing NFIP policy number, the property’s address, and the scheduled closing date. Any details regarding the buyer’s new lender, if applicable, are also needed to ensure the policy meets mortgage requirements.

The Assignment of Policy form, along with the existing policy’s declarations page, is a primary document for this process. This form requires accurate input of the policy number, the effective dates, the names of the current and new insured parties, the property location, and any relevant mortgage details. The seller, their insurance agent, or the real estate agent typically initiates this preparatory phase by gathering all necessary data and completing the required forms.

The policy must be active and in good standing, with all premiums paid up to date, for a smooth transfer. Changes in property occupancy, such as from an owner-occupied residence to a rental property, must be disclosed during this preparation phase. Such changes can sometimes affect the policy’s rating structure or require an additional premium payment at closing.

Executing the Flood Insurance Transfer

Once all necessary information has been gathered and the required forms, such as the Assignment of Policy form, have been completed, these documents are submitted to the current insurer or flood insurance agent to formalize the transfer. The completed paperwork acts as the official notification for the policy assignment. The closing attorney or title company plays a role in ensuring the transfer is properly executed during the real estate transaction. They review the relevant documents and coordinate with all parties involved, including the buyer, seller, and insurance providers, to confirm the policy assignment is correctly processed.

During the closing, premiums are typically prorated between the seller and the buyer. The buyer reimburses the seller for the unused portion of the prepaid premium, and this financial adjustment appears on the final settlement statement or closing disclosure. Upon successful completion of the transfer, the new owner receives an updated declarations page, serving as official proof of the policy assignment and reflecting their name as the insured party. This confirms the continuity of coverage without any lapse or waiting period for the new policyholder.

Transferring Private Flood Insurance Policies

Unlike NFIP policies, private flood insurance policies are generally not transferable to a new owner when a property is sold. This means the existing private policy held by the seller will typically terminate upon the sale of the property, requiring the new owner to secure a new flood insurance policy.

Private flood insurance policies are often underwritten based on the specific risk profile of the original policyholder and are considered contractual agreements unique to that individual or entity. This personalized underwriting process is why these policies are not designed to be transferred to a different owner. If a property has an existing private flood insurance policy, the buyer should anticipate needing to obtain their own coverage. The new owner should shop for quotes from various private insurers or consider an NFIP policy to ensure continuous flood protection for their newly acquired property.