Blog > Can You Take Over the Seller's Flood Insurance Policy?
By Randy Richardson, Broker Associate, The 4th Right Team
This post is part of our Mississippi Gulf Coast home insurance guide.
Quick Answer: Yes. When you buy a home on the Mississippi Gulf Coast, the seller can usually assign their NFIP flood insurance policy to you at closing, and FEMA confirms the policy's discounts transfer with it. That can be worth thousands. Under Risk Rating 2.0, a brand-new flood policy starts at the full-risk rate, while an existing policy climbs toward that rate by no more than 18% a year for most policyholders. If the seller's premium is still below full risk, taking over their policy keeps you on that slower path. The seller has to sign the assignment by closing day, so ask early.
Almost nobody asks this question. Buyers shop for a new flood policy the same way they shop for homeowners coverage, and they never find out the seller's policy was the cheaper option.
Can a buyer take over the seller's flood insurance in Mississippi?
Yes, if it's an NFIP policy. FEMA calls it an assignment. The seller signs a form that moves the policy into your name, and the coverage continues without a gap. FEMA's own Risk Rating 2.0 guidance says policyholders can still transfer their discount to a new owner by assigning the policy when the property changes hands.
The timing is strict. The seller generally has to sign the assignment on or before the closing date. Once the seller cancels the policy and takes a refund, it's gone. You can't bring it back after closing.
Private flood policies are a different story. Those follow the carrier's own rules, and some don't allow assignment at all. If the seller's flood coverage is private, have your agent call that carrier directly.
Why would I want the seller's flood policy instead of my own?
Because of how FEMA phases in price increases. When Risk Rating 2.0 started pricing each building by its own risk, many existing policies came in below their new full-risk rate. By law, those premiums can only rise so fast. For most policyholders, the cap is 18% a year.
A new policy doesn't get that cushion. It starts at full risk on day one. So two buyers of the same house can pay very different premiums depending on one signature at the closing table.
Here's a hypothetical. Say the seller pays $1,500 a year and the full-risk rate on the house is $3,000. If you take over the policy, you pay $1,500 for the rest of this term. At each renewal it rises by up to 18%, to about $1,770, then $2,089, then $2,465, then $2,909. If you buy a new policy instead, you pay $3,000 from the start. Over five years, that's roughly $10,700 versus $15,000, a difference of about $4,300.
Real numbers will vary. FEMA also adds fees and surcharges on top of the premium, and the full-risk rate itself can change. But the pattern holds. Your monthly payment feels that difference every month the policy is escrowed.
Which older discounts can come with the policy?
FEMA kept some statutory discounts after Risk Rating 2.0. The newly mapped discount applies to homes that were mapped into a high-risk zone, and it phases out each year until the policy reaches full risk. The pre-FIRM discount applies to homes built before the community's first flood map, and FEMA ties it to primary residences.
That primary residence detail matters on the Coast. If you're buying a second home or a rental, some of the pricing you inherit may not carry over the way it did for the seller. Some carriers ask buyers for proof the home will be their primary residence when the policy is assigned. Ask your agent how your use of the house changes the rate.
When is taking over the policy a bad idea?
When the seller's premium is already at or near full risk. If there's no gap left to protect, assigning the policy doesn't save you anything. A fresh quote might even come in lower.
It can also fall short on coverage. Your lender sets how much flood coverage you need, and the seller's policy was written for the seller's loan. If the limits are too low, your agent can increase them, but the added coverage is priced at today's rates.
And it doesn't replace homework. You still want the elevation certificate if one exists. An existing policy tells you what the seller pays. It doesn't tell you why.
How do I ask for the seller's flood policy without slowing the deal down?
Ask for the flood declarations page before you write. Then have your agent quote a new policy on the same address so you can compare both. That's the same reason we get the insurance quote before the offer on every Coast purchase.
If the seller's policy wins, write the assignment into your offer. Your agent and the seller's agent can coordinate the form with the flood carrier and the closing attorney. Expect to reimburse the seller for the unused part of the premium they already paid. Your closing attorney will show how that's handled on your settlement statement.
Watch the calendar in hurricane season. If a named storm enters the Gulf, carriers can pause new coverage. A policy that's already in force and simply changes hands is a lot easier to keep moving than a brand-new application.
What if the seller doesn't have flood insurance?
Then you're buying new, and you'll pay the full-risk rate. A new NFIP policy normally has a 30-day waiting period. If you buy it as part of your loan closing and apply and pay by closing day, coverage starts at closing with no wait.
If the home is in Zone X and your lender doesn't require it, don't skip it just because nobody's making you. Here's what AE vs. X actually costs and why X doesn't mean dry.
What should sellers do with their flood policy?
Keep it in force until closing, and don't cancel it early to get a refund. An assignable policy with a below-market premium is a real selling point. Tell your agent about it before you list.
You'll be sharing those numbers anyway. Mississippi's disclosure form asks whether flood insurance is required, what the premium is and when it was last adjusted. Here's what sellers must disclose about flooding. A buyer who sees a lower premium they can take over has one more reason to pick your house.
By the Numbers
18%: annual cap on premium increases for most existing NFIP policyholders
October 1, 2021: Risk Rating 2.0 began for new NFIP policies
April 1, 2022: Risk Rating 2.0 applied to all renewals
Day one: when a brand-new NFIP policy pays the full-risk rate
On or before closing: when the seller must sign the assignment
30 days: standard NFIP waiting period, waived for a policy bought at loan closing
About $4,300: five-year difference in the $1,500 vs. $3,000 hypothetical above
The Bottom Line
The seller's flood policy is one of the few things in a Coast home purchase that can save you money for years with one signature. Ask for the declarations page early, compare it to a new quote, and put the assignment in your offer if it wins. It won't help on every house, but you'll only know if you ask. If you're selling, start with a free home value estimate. If you're buying, our buyer's guide covers the rest of the Coast-specific steps.
Frequently Asked Questions
Can a flood insurance policy be transferred to a new owner?
An NFIP policy can be assigned to the buyer when the home sells, and FEMA says the discounts transfer with it. The seller has to sign the assignment on or before closing. Private flood policies follow each carrier's own rules.
Is it cheaper to take over the seller's flood insurance?
Often, but not always. Under Risk Rating 2.0, a new policy starts at the full-risk rate, while an existing policy rises by no more than 18% a year for most policyholders. If the seller's premium is still below full risk, taking it over usually saves money.
What happens if the seller cancels their flood policy before closing?
You lose the option. Once it's cancelled, you'll need a new policy at the full-risk rate. Ask the seller to keep the policy active until the assignment is signed.
Do I pay the seller back for their flood premium?
Usually, yes. The seller prepaid the policy term, so the unused portion is typically credited to them at closing. Your closing attorney will show it on the settlement statement.
Sources
FEMA, Risk Rating 2.0 Frequently Asked Questions: assigning a policy transfers the discount to a new owner, 18% annual cap, pre-FIRM and newly mapped discounts
National Association of REALTORS®, Myth Buster: FEMA Risk Rating 2.0: discounts transfer by assigning the policy, 18% cap, grandfathered rates preserved
Coalition for Sustainable Flood Insurance, Risk Rating 2.0: October 1, 2021 and April 1, 2022 effective dates, new policies at full-risk rate, assuming an existing policy to stay on the glide path
FEMA, NFIP's Pricing Approach: property-specific rating under Risk Rating 2.0
FEMA NFIP Bulletin W-09065: waiting period exception at loan closing
About the Author
Randy Richardson is a Broker Associate and Team Leader of The 4th Right Team at CENTURY 21 J. Carter & Company. He serves buyers and sellers across the Mississippi Gulf Coast.
Randy Richardson | Broker Associate
The 4th Right Team | Century 21 J. Carter & Company
📞 Office: (228) 731-3881 | Cell: (228) 547-9999
📧 realtorrandyrichardson@gmail.com
🌐 www.The4thRightTeam.com
Looking to SELL or BUY? I know a GUY!