The government shutdown that began this week furloughed thousands of federal workers, froze essential government functions across the nation — and also halted an essential part of Florida’s booming real estate market.
During a shutdown, the federal government cannot write or renew new flood insurance policies.
In Florida, which accounts for nearly 20% of total nationwide policies for the National Flood Insurance Program, this means that some new home sales are on hold and some homeowners could be left with no coverage if their property floods while the government isn’t functioning.
“I think the timing couldn’t be worse for the southeast U.S. We’re right smack in what usually ends up being the heavier part of hurricane season. It’s really scary for homeowners who live in high-risk flood zones relying on an NFIP policy,” said Anthony Lopez, CEO of Florida-based Your Insurance Attorney. “At the end of the day, the NFIP is the backbone of flood protection for millions. Freezing it during hurricane season is irresponsible and dangerous.”
Typical home insurance — even hurricane-specific coverage — does not cover flood damage. So if rain piles up on your street and creeps under your door, a situation that is happening more frequently in Florida due to climate change, normal home insurance will not cover that claim.
That’s where the federal government comes in. Florida has 1.8 million active flood insurance policies with the National Flood Insurance Program, more than any other state.
Flood insurance is required for homeowners with a mortgage inside a FEMA flood zone, or if a homeowner has Florida-run Citizen’s Insurance as their home insurance provider — whether or not that home is in a flood zones.
During a federal shutdown, the NFIP cannot write new policies or renew existing ones. So if a home’s policy expires during a shutdown, it could mean a lapse in coverage. That does not include policyholders who already paid their renewal premiums, said Mark Friedlander of the Insurance Information Institute.
“Existing policies will remain in effect through their renewal date. For policies renewing soon, the policy renewal notice must have been received prior to Sept. 30 and the premium must be paid within a 30-day grace period to remain active. All other NFIP renewals are subject to reauthorization by Congress,” he wrote in an email.
Although the NFIP’s ability to borrow money from the federal government dramatically shrinks during the shutdown — from $30.4 billion to just $1 billion — Friedlander said he doesn’t expect this to affect the NFIP’s ability to pay out existing flood claims.
However, he said, that limited borrowing authority is “drastically limiting its ability to pay new National Flood Insurance Program claims after a hurricane or another severe weather event that occurs during the shutdown.”
The biggest impact is on single-family home sales. In a government shutdown, NFIP cannot write new flood insurance policies, potentially stymying new home purchases. The National Association of Realtors estimates that 1,300 closings could be affected nationally ever single day, or about 40,000 in a month.
“If the Congress can’t get together fast enough, there’ll be a major concern from the real estate community,” said Tim Weisheyer, Florida Realtors president and broker-owner of Dream Builders Realty and dbrCommercial Real Estate Services. “For now, we’re not freaking out yet.”
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Weisheyer said his thousands of members statewide have yet to get too upset about the shutdown, which is only a minor delay to some closings — for now.
If things don’t resolve in the next week or so, he said, he will have to advise his members on more creative solutions to help get homes sold and help buyers and sellers navigate the issue.
That could include purchasing a policy from Florida’s slim but growing private flood insurance market. Those policies can be far more expensive than the federally subsidized program and are available for far fewer properties, especially those in seriously risky areas.
“My personal opinion on this is that the US Congress needs to come together and pass a clean continuing resolution,” he said. “When delays like this happen and political posturing gets in the way, it has real impacts on American families.”
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Alice J. Roden started working for Trending Insurance News at the end of 2021. Alice grew up in Salt Lake City, UT. A writer with a vast insurance industry background Alice has help with several of the biggest insurance companies. Before joining Trending Insurance News, Alice briefly worked as a freelance journalist for several radio stations. She covers home, renters and other property insurance stories.