What happens to a flood insurance policy if a homeowner cancels it?

When a homeowner cancels a flood insurance policy, the correct outcome is that the premium is refunded partially. This is because most insurance policies, including flood insurance, are typically structured to allow for some refund based on the unearned premium—that is, the portion of the premium that corresponds to the time remaining on the policy after cancellation. Therefore, if a homeowner decides to cancel, they may receive a prorated refund for the months that the policy will no longer be in effect.

In contrast, homeowners do not receive a refund if they cancel a policy that is in force for the full term without a specific refund provision. The policy does not remain effective until renewal, as cancellation means that the coverage is terminated immediately upon request. Lastly, it is not necessary for the homeowner to file a claim to cancel the policy; cancellation is a separate action that doesn't require a claim to process.