NFIP to allow installment payments for flood insurance

The Federal Emergency Management Agency (FEMA) has announced it will allow National Flood Insurance Program (NFIP) premiums to be paid on an installment basis. The final rule implements an installment payment option that was mandated by Congress in the Biggert-Waters Flood Insurance Reform Act, adopted in 2012, for policyholders who are not required to pay into escrow for flood insurance premiums.  FEMA also issued related FAQs.

Until now, premiums have been remitted to FEMA in a one-time payment each year. However, pursuant to NFIP requirements, many homeowners with mortgage loans must pay an amount for flood insurance into escrow on a monthly basis, and the implementation of the installment payment option does not alter the premium escrow requirements. Once programmatic changes are made, all property-owners, both residential and commercial, will be able to make monthly premium payments to FEMA. Property owners will not be required to pay an additional fee for the monthly payments, which will be made electronically. To be able to pay FEMA on a monthly installment basis, policyholders will be required to opt in and authorize automatic, electronic payments (e.g., using a credit card or bank account) through their insurer.

Once adopted, the new payment method will be available to new property owners and to current property owners who are not required to escrow their premiums. The installment plan will be available for property owners at the time of purchase. Current property owners will be able to adopt the new method at the time their flood insurance policy is up for renewal. Once an annual or installment payment option is selected, the payment option may not be changed during the policy term.

NFIP officials said that some consumers lack the financial ability to pay their entire premium at one time.

“Providing an option for monthly installments will expand access to flood insurance to meet the evolving needs of the Nation,” NFIP officials said in a Federal Register notice. “The option to pay in installments may also increase policyholders’ budgetary flexibility by alleviating cash flow pressure, as they could use the deferred payment to address other monthly needs.”

Even though FEMA took until 2024 to implement a requirement mandated by Congress in 2012, it did not issue a proposed rule, and simply adopted the installment plan option in a final rule.