As of October 1, 2025, the federal government is officially shut down. A government shut down occurs when Congress is unable to pass appropriation bills that fund federal agencies and programs. This includes the National Flood Insurance Program (NFIP), which is managed by the Federal Emergency Management Agency (FEMA).
The NFIP is the lead provider of flood insurance for properties in the United States. The NFIP was designed to provide affordable flood insurance, encourage safer development in flood-prone areas, and reduce the financial and social impact of flooding on families, communities, and the federal government.
What Happens During a Shutdown?
This shut down comes with two months to go in the Atlantic hurricane season. The NFIP does not completely stop, but services are limited, and processing is slower, which can increase financial and operational risks for homeowners, lenders, and communities. Until this program is reauthorized, there are effects for policyholders.
Existing Policies
- If you already have an active NFIP policy, your coverage remains in effect during a shutdown. You are still protected against flood damage as per your policy terms.
- Claims can still be filed, but processing and payments may be delayed due to furloughed staff.
New Policies or Renewals
- New or renewal policies that were not approved and processed prior to the shut down cannot be issued. Anyone who had a pending flood application should confirm if coverage was processed prior to the shutdown.
- Homebuyers in flood-prone areas may face delays in closing real estate transactions, since lenders typically require proof of flood coverage.
Financial Assistance and Claims
- NFIP is funded primarily through policyholder premiums, however this program has relied on borrowed funds from the Treasury to operate. During the shutdown, available funds are reduced to $1 billion from the $30.4 billion previously according to the Congressional Research Service.
- The NFIP will continue to adjust claims. While claims payments are still possible, processing speed may suffer.
- If these funds are depleted, claims payments would be delayed until additional funding was available.
Community and Mapping Services
- Programs like floodplain mapping, community assistance, and technical guidance are typically suspended.
- These pauses do not affect active coverage but can slow long-term flood risk planning.
There are a number of private insurers who offer flood coverage outside of the NFIP program. These carriers can be engaged for upcoming real estate transactions during this lapse. Private insurers offer different coverage options and rate parameters than the NFIP program. Coverage can be broader and include shorter waiting periods and better rate structures.
Built to be more than a broker
Delays in policy issuance or claims processing can leave homeowners at financial risk if a flood occurs during the shutdown. Lenders may also require proof of insurance for mortgages, so delays can affect real estate transactions in flood-prone areas. Contact your Sentinel team to learn more about the National Flood Insurance Program and ways to minimize risk during the government shutdown.
