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#1488722 - 01/03/11 11:05 PM Flood insurance effective date
drewella Offline
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Just got done having a lively debate with an insurance agent.

About 4 months ago, customer's flood policy had expired. Bank sent letter, waited 45 days. On the 45th day, the customer purchased flood insurance. Today, during routine audit, I noticed that for this customer, the policy was effective 30 days after the date the policy was purchased. I called the agent who said that the 30 day exception only applied when a new loan and new policy were being purchased. I asked him to show me where it said that. He said he called the insurance company and that I would need to take it up with them. So I did. I referred them to GR-9 and 10 of the insurance agents manual and also page 38 of the Mandatory purchase manual. They said they didn't realize that the policy had actually expired so, in our case the effective date should have been the date the policy was purchased. That doesn't even make sense to me because if the customer was renewing an existing flood policy why would there be a gap in the coverage upon renewal? My experience has been that very few agents actually know what the requirements are for flood insurance.

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Flood Compliance
#1488746 - 01/04/11 12:41 AM Re: Flood insurance effective date drewella
Way Out West Offline
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Originally Posted By: drewella
My experience has been that very few agents actually know what the requirements are for flood insurance.


Ditto that. In fairness, some blame my rest with your customer who probably didn't inform the agent (and almost certainly didn't know to inform the agent) that flood insurance was being required by his or her lender and to request a waiver the 30 day waiting period. But shame on the agent for not asking.

But geez, you'd figure any agent would be anxious to waive the waiting period which would mean the policy would expire 30 days sooner and they'd get paid for the next renewal 30 days sooner. So much for self interest.
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#1488805 - 01/04/11 01:41 PM Re: Flood insurance effective date Way Out West
rlcarey Online
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Galveston, TX
If the customer has an existing policy and they do not pay the premium within the 30 day grace period, but pay it on (for example day-45), the flood insurance rules will not waive the 30 day wait period. This is a poorly understood nuance in the system. The bank should be force placing insurance for the 30-day gap.
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#1488835 - 01/04/11 02:23 PM Re: Flood insurance effective date rlcarey
drewella Offline
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Apparently the first policy was actually allowed to lapse because the property owner was under the impression that flood insurance was no longer required.

rl, is there a reference point in the manual you can direct me to?

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#1488842 - 01/04/11 02:31 PM Re: Flood insurance effective date drewella
Dan Persfull Online
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Dan Persfull
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Bloomington, IN
Mandatory Purchase Guidelines:

Page 38

Appendix 6
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#1488883 - 01/04/11 03:18 PM Re: Flood insurance effective date Dan Persfull
drewella Offline
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Dan, I had read through page 38 of rhe manual as well as the appendix. That is where I came up with the understanding that when flood insurance is purchased as a requirement of a loan, then there is no wait period.

Under Appendix 6, B.3. New Policy in connection with lender requirement - the 30 day waiting period does not apply when flood insurance is required as a result of a lender determining that a loan on a building in a special flood hazard that does not have flood insurance coverage should be protected by flood insurance. Coverage is effective upon the completion of an application and the presentment of payment.

I understand that to mean that if

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#1488924 - 01/04/11 03:46 PM Re: Flood insurance effective date drewella
rlcarey Online
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Under Appendix 6, B.3. New Policy in connection with lender requirement -

In this case, it is not a new policy, it is the renewal of the old policy after the 30 day grace period expired.

If they went out a purchased a brand new policy, then the wait period would not apply.
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#1489107 - 01/04/11 05:28 PM Re: Flood insurance effective date rlcarey
drewella Offline
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In the case where an existing loan should have flood insurance, but never did (we screwed up). The bank notifies the borrower of the need for insurance as a condition of the loan, improvements are in flood zone, and so on. 45 days go by. On the 45th day the borrower purchases insurance. New insurance - so 30 day wait does not apply correct? If insurance co issued with 30 day wait, would this be sited as a violation because the bank didn't have insurance in place after 45 days?

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#1489156 - 01/04/11 06:18 PM Re: Flood insurance effective date drewella
rlcarey Online
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Galveston, TX
New insurance - so 30 day wait does not apply correct?

Yes

If insurance co issued with 30 day wait, would this be sited as a violation because the bank didn't have insurance in place after 45 days?

Yes
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#1489241 - 01/04/11 07:19 PM Re: Flood insurance effective date rlcarey
Dan Persfull Online
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Dan Persfull
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Bloomington, IN
Originally Posted By: rlcarey
Under Appendix 6, B.3. New Policy in connection with lender requirement -

In this case, it is not a new policy, it is the renewal of the old policy after the 30 day grace period expired.

If they went out a purchased a brand new policy, then the wait period would not apply.


Also page 38 & 39 refers to the "initial" purchase of insurance.
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The opinions expressed are mine and they are not to be taken as legal advice.

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