Insurance Continuing Education – Cancelling a Flood Insurance Policy

The cancellation or nullification of Flood Insurance Policy procedures can be found in detail at http://www.fema.gov/business/nfp/manual.shtm  –  and it contains some10 pages of detail.  This discussion does not cover all of the intricacies and details contained in the manual, but should give the agent guidance on what canceling or nullifying a policy can entail, what is needed, and how it can be explained to the client.

REFUNDS

Refunds will be made by the insurance company for the current and one prior year.  If refund is requested for a period of more than 2 years, then the NFIP must process the request.  The request must consist of a policy cancellation request and the premium refund calculation for each year.  (A copy of the cancellation request form follows.)  The insurer must also include statistical records for each policy term and evidence of premium having been received—accounting details which should be expected.

COMPLETING THE CANCELLATION FORM

Current Policy Number: In the upper right-hand corner of the form, enter the NFIP policy number.

Policy Term: Enter the policy term and the cancellation effective date.

Agent Information: Enter the complete name, mailing address, phone number and fax number of the agent/producer.

Insured Mail Address: Enter complete name, mailing address and phone number of the insured.  If insured has moved, enter the new mailing address.

First Mortgage: Enter the complete name, mailing address, phone number and fax number of the first mortgagee.

Other Parties Notified: Enter the complete name, mailing address of all other interested parties that should be notified, such as an additional insured, second mortgagee, loss payee, trustee, or disaster assistance agency.

Property Location: Enter the location of the insured property.

Cancellation Reason Code: Check the reason for cancellation of the policy and provide any additional information required.  (A list of cancellation codes follows.)

Refund: Check the appropriate box to indicate to whom the refund is to be made payable.

When the cancellation/nullification notice has been received and if it directs the NFIP to make a premium refund to the PAYOR, and the policy has been endorsed showing the PAYOR as a WYO company or agency, then

F the NFIP will make the refund payable to the insured and mail the refund in care of the producer.

Check the appropriate box to indicate to whom the refund should be mailed.

Signature: The insured must sign and date the Cancellation/Nullification Request Form for all cancellation reason codes except for 5 and 6.  The producer must sign, date, and enter a Tax ID Number or Social Security number in every case.  After the form is completed, attach all supporting documents, and mail the original to the NFIP

The producer should retain the second copy; the third copy goes to the insured and the 4th copy to the mortgagee.

After this form has been processed, the NFIP will send the producer, mortgagee and insured a notice of cancellation.

 

CANCELLATION REASON CODES

The following reason codes for cancellation/nullification of NFIP policies is a summary of the reasons as most of them are self explanatory.  For more details, please refer to the Flood Insurance Manual.

1.  Building Sold or Removed.  Insured has no more insurable interest, or any other reason that the building is sold or removed.  If the building is sold, proof of sale is required.  Request must be received within 1 year of sale/removal, accompanied by Bill of Sale, settlement statement, or other such proof of removal or total loss.  Up to 2 years pro rata refund

2.  Contents Sold or Removed.  Insured no longer has an insurable interest or the property has been removed from the property.  Proof is needed, such as Bill of Sale, etc.  Pro rata refund.  Cancellation request must be received within 1 year of new policy effective date.

3. Policy Canceled and Rewritten to Establish a Common Expiration Date with Other insurance Coverage.  A “housekeeping” reason and new policy must be rewritten with the same company for the same or higher” amounts of coverage.  This should be accompanied by a Cancellation form for the previous policy.  One year refund maximum.

4.  Duplicate NFIP Policies.  Refund is pro rata.  Insured can choose which policy to keep, but only one policy will be effective.  Document by submitting copy of declaration page(s) and copy of force-placement letter from the mortgagee if applicable. Force-placement usually has been done by the lender, but if both policies are applicable, the WYO company will cancel the force-placed policy.

5.  Non-Payment.  If there has been an “insufficient funds” check used to pay the premiums, policy is then nullified, with bank’s notice attached to the form.  A full premium refund will be provided to the producer if the producer has sent his funds to the insurer.  If the WYO covers the premium for a prospective insured and then does not receive payment, the policy can be nullified.  Full refund.

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Author: Travel Deals

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