Government Shutdown Freezes National Flood Insurance Program: What Homeowners and Buyers Need to Know

FEMA's National Flood Insurance Program is unavailable for new customers, increased coverage or renewals during the government shutdown. That means some home sales could be stalled.

By Karl Susman, CPCU, LUTCF, CIC, CSFP, CFS, CPIA, AAI-M, PLCS

published 31 October 2025

in Features

Floodwaters in a neighborhood. — (Image credit: Getty Images)

Did you know that because of the government shutdown, FEMA's National Flood Insurance Program is not available to new customers or people who want to increase their coverage?

On March 15, Congress extended the flood insurance funding through September 30. As we are now well past that date, the program has been frozen. So what does this mean?

The National Flood Insurance Program (NFIP) covers between 4.7 million and 5 million properties across the United States. As of this writing, if you have a paid-in-full NFIP policy, then if you file a claim, you should have your claim covered.

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But if you're looking to buy a new policy — for example, because you bought a house — you're out of luck. If you're looking to increase your coverage, you're out of luck again. If your policy has lapsed and you want to get it back, you're still out of luck.

NFIP cannot write new policies, increase coverage or reinstate any existing policy. If your policy is coming up for renewal, you may be out of luck there, too, as NFIP isn't issuing renewals either.

Your home sale might not go through

As crazy as this sounds, the impact is far greater. Real estate sales are being heavily impacted since estimates suggest that about 1,300 home sales per day may be lost due to lenders requiring a home to have a flood insurance policy.

Remember, a flood insurance policy effectively helps to protect a bank's collateral, namely the property, in the event of flood damage. So if you think a bank will lend you money if it can't protect what it is lending for, you're sorely mistaken.

So what's a property owner to do?

If you haven't already shopped around for your flood insurance, then now is definitely the time. The federal government is not the only one offering flood insurance.

Flood insurance is offered by many privately owned insurance companies. The prices can be dramatically different than what the NFIP offers, either better or worse.

Coverage will differ as well, since a private insurance company can offer more choices than the federally mandated policy does.

You might want to check your homeowners policy

It is also worth mentioning that flood insurance covers very different loss types than your homeowners, condo owners or renters policy does. While many of those policies will cover water damage, they will not cover flood damage.

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To be more precise, damage to a home caused by flooding is typically specifically excluded from a homeowners policy. You are reading that correctly — flood damage is not the same as water damage, and flood damage is excluded from most homeowners policies.

That means, among other things, a homeowner whose home has rising water damage will need a flood insurance policy in place to cover any damage.

Additionally, you may say to yourself, "Self, you don't need a flood insurance policy because it doesn't flood here."

If this sounds like you, check your homeowners insurance policy language, and you may likely find a cornucopia of detailed explanations for what is and what isn't considered flood damage.

You may be surprised to find that if the water isn't coming in from the roof or a broken pipe, for the most part, you may need a flood insurance policy to have the protection you think you already have.

What you can do

Contact a local insurance broker and ask them to see how much a flood insurance policy costs compared to a private insurance company.

Want to learn more about insurance? Visit icgs.org.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Karl Susman is a veteran insurance agency principal, nationally engaged insurance expert witness and broadcast host who translates insurance from jargon to judgment. For more than three decades, he's helped consumers, courts and policymakers navigate coverage, claims and compliance. As Principal of Susman Insurance Agency, Karl works directly with households and businesses to compare options and make clear, defensible coverage decisions.