Congress Let the National Flood Insurance Program Expire—Here’s Who’s in Trouble First

The National Flood Insurance Program (NFIP), which insures nearly 5 million properties across the U.S., has officially lapsed following the government shutdown. As of midnight on Sept. 30, FEMA can no longer write new or renew existing policies under the program, leaving flood-prone homeowners in a dangerous lurch.

While the program has been set to expire 33 times in the last eight years, this lapse comes at the worst possible time: amid peak hurricane and flood season, a stalled housing market, and a time of broader uncertainty for FEMA.

Homeowners with active policies will still be covered until their expiration dates, and FEMA can continue processing claims as long as their funds last. And while many lenders are expected to suspend requirements for flood insurance until the program is renewed, new homebuyers, especially those in high-risk zones, may find themselves dangerously exposed if disaster strikes.

Why NFIP matters for home sales

The National Flood Insurance Program, or NFIP, has been a cornerstone of U.S. housing policy since Congress authorized it in 1968. The program was designed to reduce the financial devastation caused by floods and to give property owners in flood-prone areas access to insurance that private markets couldn’t provide.

At its peak in 2009, NFIP covered more than 5.7 million policies, according to the Insurance Information Institute. By 2021, that number had dipped to 4.95 million as private insurers began carving out a share of the market by offering more comprehensive coverage, if at higher overall premiums. Despite that, the federal program remains the bedrock of flood insurance in the U.S., especially in areas most at risk because the government cannot deny coverage to an eligible owner as private insurers can.

“NFIP supports nearly half a million home sales annually, contributing $70 billion to the U.S. economy and over a million jobs,” says Shannon McGahn, executive vice president and chief advocacy officer at the National Association of Realtors®. 

That economic footprint speaks to just how deeply embedded flood risk is to the housing market—and how intertwined the program has become with the broader housing ecosystem.

Standard homeowners insurance doesn’t cover flood damage, and for any property located in a high-risk flood zone—officially known as a Special Flood Hazard Area (SFHA)—flood insurance is a mandatory requirement for federally backed loans and often required by private lenders, too. So without NFIP, many deals can’t move forward. 

“If a property is located in a Special Flood Hazard Area and the owner has purchased their property with a loan from a federally regulated and insured lender, then they are required to carry flood insurance for the life of the loan,” explains Brian Catalano, vice president of National Flood Insurance Sales and Underwriting at AFR Insurance Services.

In other words: no insurance, no mortgage—and, often, no sale if a buyer can’t secure the necessary policy. 

That’s why even the threat of an NFIP lapse sends shockwaves through the housing market. Roughly 1,300 real estate closings per day—or 40,000 closings per month—could be affected across the U.S. now NFIP has been allowed to expire, according to estimates from NAR. After a “cruel summer” of stalled sales, the market now faces an equally stormy fall if flood insurance remains in limbo for much longer.

What a lapse does

When Congress fails to reauthorize the National Flood Insurance Program (NFIP), FEMA loses its authority to issue new or renew existing flood insurance policies. Existing policies remain in effect until their expiration dates, and claims continue to be processed—but only as long as the program’s remaining funds allow.

But new homebuyers who need flood insurance to close on their purchase may have little recourse.

"Home sales in flood-prone areas could stall almost immediately," says Realtor.com® senior economist Anthony Smith. "New purchases are at risk, potentially freezing deals and creating ripple effects for real estate agents, mortgage lenders, and title companies."

In some cases, homebuyers may be able to assume a seller’s existing NFIP policy, especially if the property is in a high-risk zone. But that’s not always an option—and it does little to help homeowners whose policies are due for renewal during the lapse.

Even these homeowners with active policies face risk, as funding shortfalls could delay their claims. That’s part of what makes the current lapse so dangerous.

The U.S. is currently in the middle of hurricane season, with multiple devastating and deadly floods having already torn through the country. And currently, southeastern U.S. homeowners are bracing for Tropical Storm Imelda, which is expected to strengthen into the Atlantic’s next hurricane this week and cause flooding from Florida through North Carolina and southern Virginia.

For those who go without coverage, “The greatest risk is losing everything to flooding and having nowhere to turn for recovery,” says Jimi Grande of the National Association of Mutual Insurance Companies (NAMIC). “Standard homeowners insurance does not cover flood losses, which means those unprepared with flood coverage may be forced to rely on their savings or disaster aid (assuming it's available) when deciding whether they can repair or rebuild their home.”

If that seems like a small risk, consider that as little as a single inch of flooding can cause as much as $25,000 worth of damage, according to FEMA estimates.

Florida faces the biggest blow

Nowhere will the lapse hit harder than Florida. The Sunshine State holds nearly 1.8 million NFIP policies, more than any other state by far. With 8,436 miles of coastline, low-lying topography, and a housing market that’s heavily dependent on FEMA-backed coverage, any disruption to the program reverberates quickly.

While private insurers can fill the gap for some, it often comes at higher costs—and affordability is already stretched to the breaking point. Roughly 20% of Floridians go without homeowners insurance entirely, unable to keep up with the rising premiums for wind, hail, and fire coverage. Those estimates don’t even account for the added expense of flood policies.

Looking ahead, the financial strain is only expected to grow. Nationally, First Street Foundation projects that average annual flood damages will rise 28% by 2055. That means the true cost of coverage—whether through NFIP or the private market—will likely keep climbing, leaving homeowners in Florida and beyond caught between escalating risk and escalating premiums.

NFIP vs. private flood insurance

The National Flood Insurance Program (NFIP) has long been the backbone of flood coverage in the U.S., especially in high-risk zones where private insurers hesitate to underwrite policies. But the program isn’t without limits. NFIP caps payouts at $250,000 for a building and $100,000 for contents, which can fall short for many homeowners given today’s property values.

In contrast, private flood insurance has emerged as a more flexible, if sometimes more expensive, alternative. 

“Private flood insurance costs are almost always higher, but coverage and limits can be much better if it's available,” says Ted Patestos, CEO and founder of Tiger Adjusters. “You may have a much higher limit of personal property coverage, you may get flooring coverage you won't otherwise have in an NFIP policy and you may also be entitled to additional living expense coverage for displacement you wouldn't otherwise be entitled to.”

That’s partly why over the past decade, private options have gained traction. “[Private flood insurance] can be a better fit in some cases,” says Gregg Barrett of the WaterStreet Company. “It can offer higher limits with broader coverage and more flexible terms than NFIP.”

Still, for many homeowners—particularly those in FEMA-designated flood zones—the NFIP remains the only viable choice. Accessibility and affordability continue to be the deciding factors, even as federal rules now require lenders to accept private policies that meet NFIP equivalency standards. 

Outdated flood maps and rising risk

Even as the debate over the National Flood Insurance Program’s future unfolds in Washington, a larger and more persistent problem looms: America’s official flood risk maps are dangerously out of date. Roughly 75% of FEMA’s Flood Insurance Rate Maps (FIRMs) are outdated—some by decades, according to research from First Street. That disconnect means millions of homeowners may be exposed to flooding without even realizing it.

Once-rare events are becoming more common, with so-called 1,000-year floods—which have just a 0.1% chance of happening in any given year—hitting four separate U.S. communities in a single week in July 2025.

A shocking 98% of U.S. counties have experienced flooding at some point, yet fewer than 4% of households nationwide carry NFIP policies, according to FEMA. That gap is especially dangerous because a growing share of flood losses now occur outside FEMA-designated high-risk zones.

“Flooding can happen anywhere,” says Meg Herman, of Goosehead Insurance, but few realize it. 

Part of the problem is perception. Flood risk is often associated exclusively with coastal areas, leaving inland residents unaware of their exposure.

“[A] destructive misconception is that homes far from the coastline are safe from flood risk,” explains Max Dugan-Knight, a climate scientist at Deep Sky Research. “One impact of climate change is that storms are traveling further inland than ever before and dumping vast quantities of water in areas that are not used to that level of rainfall.”

That growing unpredictability is fueling calls to take a holistic look at how flood risk is communicated and mitigated. 

“It’s time to start thinking that flooding can happen in ‘Anytown, USA,’” says John Dickson, of Aon Edge, a private flood insurance company. “Everyone lives in a flood zone. Water does not know to stop at the artificial lines that define where flood insurance is federally required and where it is not.”

Gridlock leaves homeowners exposed

The NFIP lapse underscores the fragility of a system millions rely on to protect their homes—and the risk of letting it become a political bargaining chip. 

Without swift congressional action, transactions in high-risk zones may stall, families with pending claims could be left in limbo, and millions of homeowners will remain exposed to costly natural disasters without a reliable safety net. Each day of inaction adds to the uncertainty, raising the prospect that buyers, sellers, and communities will be forced to gamble with risks that no private market can fully absorb.

In a letter to Congress earlier this month, NAR warned lawmakers that stopgap extensions and political brinkmanship leave the housing market vulnerable to repeated shocks. The question now is whether Congress will move beyond short-term fixes to modernize and stabilize the program—or continue to leave homeowners, and the broader real estate economy, underwater.