Cancellation Qualifying Reasons

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This article outlines details about NFIP Cancellations for insurance agents.

The NFIP relies on a structured system of cancellation reason codes to ensure policy cancellations are handled consistently and transparently. These codes categorize the allowable reasons for canceling or nullifying a policy, such as when there is no longer an insurable interest, duplicate coverage exists, or a property becomes ineligible for coverage. Each code outlines specific conditions, documentation requirements, and refund eligibility. Understanding and correctly applying these codes is crucial for agents to ensure compliance with NFIP guidelines and avoid processing delays.

The codes are grouped into categories based on common scenarios, such as "No Insurable Interest," "Duplicate Coverage," and "Lender No Longer Requires Insurance." Each category addresses unique circumstances, with clear rules for refunding premiums and handling associated fees. For example, full refunds may apply when a property is sold, while pro-rata refunds are issued for mid-term cancellations due to eligibility changes. Agents must carefully review the details of each code to determine the appropriate action, required documentation, and refund terms. This system ensures cancellations are processed fairly while maintaining the integrity of NFIP policies.

Cancellation Reason Codes by Category

A. No Insurable Interest

• Code 01 – Building sold, removed, or destroyed.
• Code 02 – Contents sold, removed, or destroyed.
• Code 07 – Property closing did not occur.

B. Establish a Common Expiration Date

• Code 03 – Policy canceled and rewritten to establish a common expiration date with other insurance coverage for the same building.

C. Duplicate Coverage

• Code 04 – Duplicate NFIP policies.
• Code 10 – Condominium unit or association policy converting to RCBAP.
• Code 26 – Duplicate policy from a source other than NFIP.

D. Not Eligible for Coverage

• Code 06 – Property not eligible for coverage at time of application.
• Code 27 – Property becomes ineligible for coverage during policy term.
• Code 29 – Building physically altered and no longer eligible for NFIP coverage.

E. Lender No Longer Requires Insurance

• Code 28 – Insurance no longer required by lender.

F. Invalid Payment or Fraud

• Code 05 – Invalid payment.
• Code 23 – Fraud or misrepresentation.
• Code 30 – Insufficient premium to retain coverage.

G. Other Reason Codes

• Code 13 – Nullification prior to policy effective date.
• Code 20 – SRL written with incorrect insurer.
• Code 21 – Continuous lake flooding or closed basin lakes.
• Code 22 – Cancel and rewrite due to administrative error.