When a loan closing is involved, if applications or change requests are dated after the lapse, then the policy or change request cannot be issued. If the loan is closing before the lapse in authority, and the premium payment is not part of the closing, if the application/request and premium are received within ten days of the closing date the policy/change may be effective the date of the closing. When the premium for the payment is from the escrow account, title company, or settlement attorney, then payment must be received within thirty days of the closing date. If the loan closes after the lapse in authority but the date of coverage was before the lapse period, then payment from the insured is acceptable within ten days and if payment is from the escrow account or others, payment is acceptable within thirty days of the effective date of the closing.

 Renewals are handled similarly; offers to renew a policy cannot be made during the lapse in authority. If a renewal is offered before the lapse in authority and premium payment is received before thirty days have passed, then the policy may be renewed. The same applies if underpayment was made as long as the difference is made up within thirty days. If payment is received beyond the thirty days, the policy may not be renewed. If the renewal requests increased limits that are within the inflation factors on the bill or the next higher Preferred Risk Property (PRP) or a newly mapped limit, it is processed the same as policies with premiums received within or after the thirty-day grace period, whichever applies. If the renewal requests a higher limit than the inflation factor or PRP or newly mapped limit, the amount above the existing coverage amount must be handled as if it was a new policy or a request to increase coverage as discussed earlier.

 Endorsements that increase coverage are handled the same as new policies or requests to increase coverage, as described above. Endorsements not increasing coverage are handled using existing NFIP rules, and policies may be assigned during the lapse. Cancellations may be handled normally.

 Policies that are in force before midnight of the last effective day of authorization will remain in effect until their expiration date, and any claims filed will be handled as usual. If a policy is in force after the last day of authorization, claims on those policies are handled as usual as well. If a claim occurs under a policy that was not issued due to a lapse, it can still be investigated under a reservation-of-rights letter or a non-waiver agreement, up to the point of payment. Payment will not be made if the NFIP is not reauthorized. If the NFIP is reauthorized retroactively, then the policy will be issued and the claim paid as appropriate. If the reauthorization is not retroactive, and the NFIP is authorized with a lapse, policies without a waiting period, which are the loan closings, would become effective the date of the reauthorization. Policies with a thirty-day waiting period would become effective thirty days after the date of reauthorization. For example, the date of the lapse is December 22 2017. The NFIP is reauthorized January 22 with a lapse; the reauthorization does not go back to December. Policies that involve loan closings will be effective the date of reauthorization, January 22. Policies with a thirty-day waiting period will be effective February 22. When reauthorization is not retroactive to the first day of the lapse, policies with a one-day waiting period become effective one day after the effective date of the reauthorization. If reauthorization is effective January 5, the policy is effective January 6.

 The NFIP makes a number of recommendations to carriers while the program is lapsed. All premiums for changes or policies effective on or after the first day of the lapse should be held in abeyance, as should applications. Since the acceptance of applications and premiums gives the impression that a contract is in force, carriers should advise applicants in writing that insurance is unavailable by law, pending reauthorization. The NFIP provides a sample letter for carriers to use to notify applicants of the situation.