Does the Government Shutdown Affect Flood Insurance?
NFIP Suspends New Policies and Renewals
The government shutdown that began Tuesday night suspended the National Flood Insurance Program, preventing new policies from being purchased and blocking renewals for existing coverage. Congress created the NFIP through the National Flood Insurance Act of 1968, and the FEMA-managed program has over 4.7 million policies representing $1.3 trillion in coverage.
Current Policies Remain Valid
Current policies remain valid through their expiration dates, but the program cannot process renewals during the shutdown. If you already have an active NFIP policy, it remains valid through its expiration date, and FEMA can still pay claims—as long as they have the funds available. However, policyholders whose coverage expires before the shutdown ends cannot renew until Congress reopens the government.
Real Estate Transactions Stalled
The problem would be most acutely felt in Florida, where about 14,800 monthly home sale closings depend on securing flood insurance, while Texas, with 3,500 monthly closings, would also be impacted. According to NAR research, 1,400 property sales each day could be forced to move forward and go bare without the protection of flood insurance, depending on lender approval. Lenders are prohibited from issuing government-backed mortgages in FEMA-designated flood hazard areas without flood insurance.
Claims Payment Concerns
FEMA's borrowing authority drops from $30.4 billion to just $1 billion during a shutdown, meaning if a major flood event occurs, FEMA may not have enough funds to pay out claims promptly. While FEMA has the authority to pay valid claims with available funds, a catastrophic event during an extended shutdown could strain the program's ability to fulfill obligations.
Historical Context
NFIP's last long-term reauthorization was in 2012, and since the end of 2017, its continuation has depended on 33 short-term reauthorizations. The last time the program lapsed was for 13 hours in March 2024. During a roughly 30-day freeze in June 2010, the National Association of Realtors estimated 1,400 home sales were canceled or delayed each day.
Private Insurance Alternative
Private flood insurance remains available during shutdowns and may provide better coverage options. However, the private market represents a relatively small share of total flood insurance coverage. Homeowners facing NFIP lapses should explore private options, though pricing and availability vary significantly by location and risk profile.
The shutdown creates immediate disruption for millions of policyholders and thousands of daily real estate transactions, demonstrating the program's critical role in the housing market and disaster preparedness.
