What are acceptable flood insurance coverage policies?

Two policy types are universally acceptable across agency and lender guidelines: (1) NFIP standard policies and (2) private flood insurance (PFI) policies meeting NFIP equivalency standards. ACORD forms are explicitly rejected by multiple lenders as evidence of flood coverage.

---

The Two Core Policy Types

• NFIP Policy — Standard policy issued under FEMA's National Flood Insurance Program; the baseline accepted policy type across all programs.
• Private Flood Insurance (PFI) — Issued by a private carrier; acceptable when coverage terms and conditions are at least equivalent to those of an NFIP standard policy for the applicable property type.

"Flood insurance should be in the form of the standard policy issued under the NFIP or by a private insurer. The terms and conditions of the flood insurance coverage must be at least equivalent to the terms and conditions of coverage provided under the standard policy of the NFIP for the appropriate property type." AD Mortgage

---

Agency Guideline Requirements

Fannie Mae

The flood insurance policy must be one of the following Fannie Mae:

• An NFIP standard policy, or

• A private flood insurance policy where "the terms and amount of coverage are at least equal to that provided under an NFIP policy based on a review of the full policy issued by a private insurer, and the insurer meets Fannie Mae's rating requirements as specified in Property Insurer Rating Requirements in B7-3-01." Fannie Mae

• "A Policy Declaration page is acceptable evidence of flood insurance." Fannie Mae

• Non-participating communities: "The loan is not eligible for purchase by Fannie Mae." Fannie Mae

• NFIP lapses: "Such private flood insurance policy coverage is not a required alternative in the event of a lapse of NFIP coverage." Fannie Mae

Freddie Mac

Acceptable policy types :

• Standard NFIP policy, or

• Private flood insurance policy meeting equivalent coverage standards.

• Non-participating communities: "If the area where the Mortgaged Premises is located is an SFHA but the community has become a nonparticipating community and flood insurance provided by the National Flood Insurance Program will not be renewed for that community, the Servicer must require the Borrower to obtain private flood insurance."

FHA

FHA defines two policy types :

• NFIP policy — insurance managed by FEMA covering physical damage by floods.
• Private Flood Insurance (PFI) policy — insurance provided by a private insurance carrier.

For a PFI to be acceptable under FHA, the Mortgagee must ensure the policy :

• Is issued by a company licensed or admitted in the state/jurisdiction where the property is located (or recognized as a surplus lines insurer for certain commercial coverage types).

• Provides coverage at least as broad as the standard NFIP policy for the property type, including exclusions and conditions.

• Has deductibles no higher than NFIP's specified maximums with similar non-applicability provisions.

• Requires the insurer to provide written notice 45 days before cancellation or non-renewal to the Borrower and Mortgagee.

• Includes information about the availability of NFIP coverage.

• Includes a mortgage interest clause similar to that in a standard NFIP policy.

• Includes a provision requiring the Borrower to file suit no later than one year after a written denial for all or part of a claim.

• Contains cancellation provisions as restrictive as those in a standard NFIP policy.

• FHA PFI Compliance Aid: A carrier may provide the statement: "This policy meets the definition of private flood insurance contained in 24 CFR 203.16a(e) for FHA-insured mortgages." A Mortgagee may rely on this compliance aid statement and may not reject a policy solely because it is not accompanied by a PFI Policy Compliance Aid.

USDA (SFHGLP)

"Existing dwellings located in a SFHA are eligible for the SFHGLP when flood insurance through FEMA's National Flood Insurance Program (NFIP) is available for the community and flood insurance, whether NFIP, 'write your own,' or private flood insurance, is purchased by the borrower." USDA

Lenders "are required to accept private flood insurance policies that meet the requirements of 42 U.S.C. 4012a(b)(1)(A) and remain responsible for ensuring private policies continue to meet this requirement." USDA

---

Lender-Specific Requirements and Overlays

AD Mortgage (Non-QM)

• Acceptable: NFIP or private flood insurance meeting NFIP equivalency. AD Mortgage
• "ACORD policies are not acceptable to document proof of flood insurance." AD Mortgage
• "The paid receipt and Policy Declaration page of a policy are acceptable evidence of coverage." AD Mortgage
• Attached condo units: "Stand-alone flood insurance dwelling policies for an attached individual condo unit are not acceptable. A master condo flood insurance policy must be maintained by the HOA." AD Mortgage

Nations Direct Mortgage (Non-QM)

• Required for Flood Zone A or Zone V properties.
• Minimum coverage = lowest of: 100% replacement cost of the dwelling, maximum NFIP coverage available, or unpaid principal balance.
• "The flood insurance policy must contain a mortgagee clause, naming Nations Direct Mortgage as the loss payee."
• Requirement may be waived if the borrower obtains a FEMA Letter of Map Amendment (LOMA) removing the property from the SFHA.

Mega Capital (HELOC/VA)

• Flood insurance policies and/or mortgagee clause updates issued on ACORD forms are not acceptable.
• Private flood insurance policies must contain the compliance aid statement: "This policy meets the definition of private flood insurance contained in 42 U.S.C. 4012a(b)(7) and the corresponding regulation." Mega Capital
• If the property is NOT in a flood zone and the Borrower elects to purchase flood insurance, the premium must be included in the proposed housing expense. Mega Capital

Windsor Mortgage (Conventional Overlay)

• Coverage must equal the lesser of: (i) 100% of insurable value of improvements at replacement cost, (ii) NFIP maximum for improvements, or (iii) unpaid principal balance.
• "The waiting period must have lapsed prior to the Mortgage Loan being eligible for purchase."
• Unmapped properties: loan may remain eligible if a Standard Flood Hazard Determination showing "Flood Zone 'None'" or "No NFIP Map" is in the file, along with a life-of-loan flood service certificate.

JMAC Lending — Venice DSCR Program

• Flood insurance required for properties in an SFHA (all "A" and "V" zones) or in a CBRS or OPA.
• "If the subject property is located within a CBRS or an OPA, flood insurance is required regardless of whether the property is located in an SFHA."
• Lender must verify flood zone status using the FEMA Standard Flood Hazard Determination form.

---

Deductible Requirements

---

Project-Level Policy Requirements (Condo / Co-op / PUD)