Policy Issuance 2-94
February 14, 1994
Subject: National Flood Insurance Program (NFIP) Procedures When Insufficient Premium Is Discovered Prior to a Loss Under the Standard Flood Insurance Policy (SFIP)
Background: Under the General Conditions and Provisions of the current SFIP, Dwelling Form, Article VIII (F) (2) (i), and General Property Form, Article VII(E) (2) (i), the payment of the correct premium for the original limits of coverage requested must be received prior to a loss under the policy for any additional limits of coverage to apply to the loss.
The NFIP regulation changes effective October 1, 1994, amend the SFIP Reduction of Coverage Limits or Reformation clause pertaining to the discovery of insufficient premium by the insurer prior to a loss (Dwelling Form, Article 9.F.2.a; General Property Form, Article 8.E.2.a; and Residential Condominium Building Association Policy, Article 10.E.2.a). The insurer will send a notice of the additional premium due to purchase the coverage originally requested, provided that the required information is available to calculate the underpayment amount. If the additional premium is received within 30 days from the date of written notice, the policy is reformed as of the inception date or endorsement effective date to provide the amount of flood insurance coverage initially requested.
Mitigation Division Policy Issuance: Until the provision becomes effective on October 1, 1994, the Mitigation Division is authorizing that the existing SFIP forms also provide for a 30-day period to pay the correct additional premium. Our reasoning for this policy issuance is that we have an obligation to communicate the discovery of insufficient premium when it is discovered prior to a loss. After we have communicated the discovery of the insufficient premium, the insured is entitled to a reasonable amount of time to submit the correct additional premium. We are deeming a reasonable amount of time in such cases to be 30 days.
Last Modified: Thursday, 25-May-2006 15:38:26 EDT