Statutory Discounts

Statutory discounts are legislated incentives within the NFIP designed to encourage participation and ensure affordability for policyholders while they transition to full risk rating.

Encourage participation in the NFIP, especially during its early stages.
Provide benefits for communities transitioning into the regular NFIP program.

Statutory Discount Glide Path

The glide path is a phased approach used to gradually eliminate subsidies provided through NFIP statutory discounts. Under this method, policyholders see annual premium increases capped at 18–25%, ensuring a manageable transition from lower premiums to actuarial-based pricing while maintaining affordability over time.

Annual increase caps prevent steep rate hikes.
Capped rate increases balance affordability with transitioning to actuarial rates.
Lapses in coverage result in losing discounts.
Transition scenarios include:
- Moving from buildings under construction to finished structures.
- Loss of statutory benefits after coverage lapse.

Statutory Discount Types

Pre-FIRM Discounts

The Pre-FIRM discount applies to buildings constructed before the community's FIRM effective date, marking its participation in the NFIP's regular program. Buildings are designated as "Pre-FIRM" if constructed prior to this date and "Post-FIRM" if built after, with the discount gradually phased out through the glide path as premiums transition to actuarial-based pricing.

Applies to buildings constructed before a community joined the NFIP.
Based on Flood Insurance Rate Maps (FIRMs).
Transitioning to actuarial-based pricing under Risk Rating 2.0.
- Phased out via "glide path" methodology with capped annual rate increases (18-25% per year).
- Aim to gradually eliminate subsidies over time.

Newly Mapped Discounts

Applies to properties reclassified from low-risk to high-risk areas.
Allows gradual premium increases using the glide path.
Ensures affordability as homeowners transition to mandatory flood insurance requirements.

Real Estate Transaction Discounts

Transferable discounts for properties insured under an NFIP policy and sold within the last year.
Replaces legacy grandfathering systems.
No prior declarations page required; proof is shown via settlement documents or deeds.

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