The Government Shutdown Impact on Southeast Texas Flood Insurance Homeowners
Immediate Impact on Current Policyholders
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. 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.
Real Estate Transactions Frozen
NAR estimates that the NFIP provides certainty for 3,590 home sale closings in Texas each month. The suspension will halt home sales in Southeast Texas, as flood-prone areas cannot close real estate deals without required flood insurance coverage. Mortgage lenders are prohibited from issuing government-backed mortgages in FEMA-designated flood hazard areas without flood insurance.
Hurricane Season Timing Concerns
The timing of the government shutdown comes during hurricane season, which generally runs from June 1-November 30, with homeowners in the southeastern U.S. preparing for potential storms. 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.
What Homeowners Should Know
If the NFIP lapses, Texans with flood insurance would be unable to renew their policies, leaving them vulnerable during hurricane season. Policyholders whose coverage expires before the shutdown ends can continue making payments and renew once Congress reopens the government. However, if your policy lapses, you may be re-rated under Risk Rating 2.0 and lose any grandfathered rates.
Alternative Options
Private flood insurance remains available during the shutdown and may provide better coverage options, including additional structures, contents, and loss of use protection. Real estate and insurance professionals can help Southeast Texas residents determine their flood risk and explore private market alternatives while the NFIP remains suspended.
The shutdown creates significant uncertainty for Southeast Texas homeowners in flood-prone areas, potentially leaving them without coverage during the most vulnerable time of year.