Can a Florida Home Buyer Take Over the Seller’s Flood Insurance?

If you're buying a home in Dunedin or elsewhere in Pinellas County, there's one insurance question worth asking early: Can the seller's flood insurance policy transfer to you?

In some cases, the answer is yes.

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For an eligible National Flood Insurance Program policy, commonly called an NFIP policy, the seller may be able to assign the existing policy to the buyer when ownership changes.

That can matter in coastal communities like ours, where flood insurance can be an important part of the total cost of owning a home.

What does "assuming" flood insurance mean?

People often call it assuming the seller's flood insurance. The technical term is an assignment.

According to FEMA's National Flood Insurance Program information, a written assignment may be permitted when ownership of an insured property transfers to a new owner. Exceptions exist, so buyers should have the insurance agent confirm that the policy qualifies.

A purchase contract or deed by itself does not automatically transfer the policy.

The seller, buyer and insurance agent need to coordinate the transfer.

Could the buyer keep the seller's lower rate?

Possibly.

FEMA has explained that certain existing NFIP discounts can transfer to a new owner when the policy is properly assigned.

That can make an existing policy worth investigating, especially when comparing the cost of several homes.

But buyers should not assume they will permanently pay the same premium the seller currently pays.

Flood insurance premiums can change over time. Coverage limits, deductibles and the buyer's circumstances may also affect the cost.

Before making a financial decision, ask the insurance agent to provide the buyer's actual expected premium in writing.

What about private flood insurance?

Private flood insurance is different.

Private policies are governed by the terms of the individual policy and insurance carrier. A private policy may or may not allow a transfer.

If the seller has private flood insurance, ask the carrier specifically whether the policy can transfer to the new owner and what paperwork is required.

What should buyers check before closing?

Here are a few questions I recommend buyers ask:

1. Is the seller's policy an NFIP policy or private flood insurance?
2. Can this specific policy transfer to the buyer?
3. What coverage limits and deductible does it have?
4. What would the buyer's premium actually be?
5. When does the current policy renew?
6. What paperwork and signatures are required?
7. Does the buyer's lender accept the coverage?
8. When will the transfer officially become effective?

The seller should also coordinate with the insurance agent before canceling an existing policy.

You do not want coverage accidentally canceled while everyone is trying to complete the transfer.

Why this matters in Dunedin and Pinellas County

Anyone who has lived around Pinellas County for a while knows that two homes only a few streets apart can have very different flood considerations.

That is why I tell buyers to look beyond the purchase price.

Insurance, flood zones, association fees, property condition, and financing can all affect what a home really costs to own.

Investigate flood insurance early in the buying process, not a few days before closing.

If an existing policy can transfer, it may be helpful. If it cannot, knowing early gives the buyer more time to shop for coverage and understand the home's true monthly cost.

For additional information, buyers can review FEMA's National Flood Insurance Program information at FloodSmart.gov and the Florida Department of Financial Services flood insurance resources.

Curt Bush