Statutory Discounts

Statutory discounts are legislated incentives within the NFIP designed to encourage participation and ensure affordability for policyholders. Statutory discounts remain critical for promoting NFIP participation while balancing affordability and transitioning to risk-based premiums.

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

Statutory Discount Glidepath

Gradual removal of discounts.
- 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

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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