Obtain and Maintain Insurance Requirements

LOUISIANA REALTORS • December 17, 2018

In July 2017, Louisiana REALTORS® published an article about “ Obtain and Maintain Insurance Requirements ” that applies to homeowners that receive federal disaster assistance. This is an important requirement for both REALTORS® and consumers to be aware of because failure to follow the provisions set forth may result in being ineligible for future disaster assistance as well as the requirement to repay disaster relief funds received. REALTORS® are encouraged to use a Flood Insurance Purchase Requirement Addendum when the transaction includes a property that is subject to the “obtain and maintain” requirements. 

To further demonstrate how this requirement is applied to homeowners, consider the following hypothetical:

Property owner John Doe owns a house located next to the bayou.  

The house is in Flood Zone A according to the recently revised "Flood Map."  

Unfortunately Doe's house floods after the bayou overflows its banks.  
Doe does not have flood insurance and makes a claim with The Federal Emergency Management Agency (FEMA) 
for repair of his house. FEMA provides aid to Doe in the amount of $20,000.00 to rebuild his house (the "Grant").  

The house is now beautiful and Doe decides to sell.  
Jane Anders buys the house paying cash.  
Although Doe disclosed the flood of the house to Anders, he did not disclose the FEMA requirement 
to obtain and maintain flood insurance on the house.  

The house floods again six months after Jane buys it.  
Jane does not have flood insurance and files a request with FEMA for aid.  
FEMA denies the request because Jane failed to obtain flood insurance.  

Doe receives a request from FEMA for return of the Grant money.  
Does Doe have any potential liability? The short answer is "yes".
FEMA Requirements

FEMA provides aid to replace, restore, repair, reconstruct or mitigate damaged property. This aid after a disaster however imposes perpetual requirements on the homeowner. FEMA expects the property owner receiving aid to protect their investment in the local community against future disasters generally by obtaining insurance if possible. The recipient of disaster relief funding who fails to obtain flood insurance and thereafter maintain flood insurance on the property ("obtain and maintain") may be ineligible for future disaster relief.

To determine if "Obtain and Maintain" requirements apply, a property owner or renter should ask the following questions:

1. Have the owners of the property received Federal disaster assistance?

FEMA, SBA, and HUD offer programs which provide individuals, households, businesses, and private nonprofits financial assistance after a disaster. These programs may include residential and commercial property.

2. Is the property being sold or rented located in a Special Flood Hazard Area?

FEMA defines “Special Flood Hazard Area” as “The land area covered by the floodwaters of the base flood is the Special Flood Hazard Area (SFHA) on NFIP maps. The SFHA is the area where the National Flood Insurance Program's (NFIP's) floodplain management regulations must be enforced and the area where the mandatory purchase of flood insurance applies. The SFHA includes Zones A, AO, AH, A1-30, AE, A99, AR, AR/A1-30, AR/AE, AR/AO, AR/AH, AR/A, VO, V1-30, VE, and V.”

IF THE ANSWER IS “YES” TO BOTH OF THESE QUESTIONS,
THE PROPERTY IS SUBJECT TO THE
“OBTAIN AND MAINTAIN” REQUIREMENTS.

The “Obtain” Requirement.The National Flood Insurance Program (NFIP) allows Federal agencies to only provide financial assistance (including disaster assistance loans) for acquisition or construction purposes in an SFHA where NFIP insurance is available, if the property for which assistance is being provided is covered by flood insurance. The amount of flood insurance must be the lesser of the following: (1) the maximum limit of coverage available under NFIP; or (2) the development or project cost (less estimated land cost). If the disaster assistance is in the form of a loan, the amount of insurance need not exceed the outstanding principal balance of the loan.


The “Maintain” Requirement. The insurance must be continuously maintained regardless of a change in ownership. For owners, this requirement runs with the property address and applies to subsequent owners. For renters, this requirement only applies for as long as the applicant for disaster assistance or the insured contents remains at the flood-damaged rental property. For loans, the insurance must be maintained during the life of the loan.


Failure to “obtain and maintain” flood insurance results in ineligibility for future disaster assistance for flood-damaged items.


The Notice Requirement Under § 582 of the National Flood Insurance Reform Act of 1994


Notification to Subsequent Owners Required. There is a duty to notify the next owner of the “obtain and maintain” requirement in writing on or before the date the property is transferred. The notification requirement applies to personal, commercial, or residential property. The Stafford Act specifically provides notification should appear in the document transferring ownership, such as the Act of Sale, as well as the Purchase Agreement.


Failure to Notify Could be Costly. If the following events occur: (1) the seller fails to provide this notice and the buyer does not obtain and maintain flood insurance as required; (2) the property is damaged by a flood disaster; and (3) Federal disaster assistance is provided to repair, replace, or restore the damage, then the seller may be required to reimburse the Federal government for the amount of the assistance previously received by the seller or, even if no new damage occurs but the file is flagged during closeout as lacking a policy, the homeowner may be required to reimburse the state for the entire amount of assistance provided. The failure to provide the notice could be a very costly error to the former owner of the property.


There is no escape: Federal Government Review for Obtain and Maintain at Grant Closeout


Another opportunity for enforcement of the "obtain and maintain" obligation is when the federal government completes the final accounting of how grant money was spent at the state level. Many people do not realize these Federal grants do not close the grant file for sometimes many years after construction. For example, the FEMA Hazard Mitigation Grant used to elevate thousands of homes after Hurricane Katrina is still open at the state and federal level and under audit. In order to close the grant, FEMA and other federal agencies requires each house's file to include a current proof of flood insurance. If the state cannot produce this document, FEMA may require return of the total amount of assistance provided to that home and subsequently the state will have the option to collect those funds from the homeowner.


REALTORS® should be aware of this requirement and provide this information to their clients. 

Downloadable copies of this information provided below.

OBTAIN & MAINTAIN WITH ADDENDUM UPDATE TO OBTAIN & MAINTAIN

DISCLAIMER


These materials are to be used for informational purposes and should not be construed as specific legal advice. These materials are not designed to cover every aspect of a legal situation for every factual circumstance that may arise regarding the subject matter included.

2026 Legislative Session Scoop - Week 4 Recap

By Louisiana REALTORS® • April 3, 2026
This week, the Legislature remained in high gear, and several items relevant to Louisiana’s real estate market moved into focus. The biggest headline for our industry this week was HB 468 by Rep. Troy Hebert , our wholesaling/consumer-protection bill, was slated to be heard on the House floor, however was bumped due to floor congestion and out-of-order bills. It is now expected to be reset for next Tuesday. This bill remains one of the clearest “market integrity” efforts on the board with clearer rules for non-traditional transactions, stronger transparency and better consumer protections. We also continued substantive policy work behind the scenes. We are actively engaging with Rep. Carver on a vacant land disclosure bill he has authored, and we appreciate that he is welcoming our input and guidance as the language is refined. Our goal is straightforward: ensure any vacant land disclosure framework is practical, reduces confusion and avoids unintentionally shifting liability or enforcement burdens onto real estate professionals. In addition, we were pleased to deepen our relationships at the Capitol this week. We had the privilege of hosting a lunch for the Governor’s Office, enjoyed meeting Governor Landry’s team, and look forward to working with them in a constructive, solutions-oriented manner as the session continues. Finally, Rep. Hebert also filed an additional measure that aligns with our legislative agenda and speaks directly to transaction risk management: HB 1027 , which would limit liability for licensed real estate appraisers in situations involving smoke and carbon monoxide detector compliance. The current law already provides that real estate agents are not liable for a seller’s failure to comply with Louisiana’s detector requirements in one- or two-family dwellings. HB 1027 would extend that same liability protection to licensed appraisers by amending R.S. 40:1581(F). This is a clean, common-sense clarification that helps prevent appraisers from being pulled into compliance disputes that properly belong with the seller’s statutory obligations. Next week, committees are scheduled to hear multiple bills relevant to real estate, including measures involving construction and roofing standards (often tied to insurance and mitigation), property rights/expropriation, and property tax and adjudicated property issues that can influence housing supply and neighborhood reinvestment. We will stay closely engaged and will flag any bills or amendments that materially affect transactions, homeownership costs or private property rights. Please view the weekly bill tracking report provided by our lobbying team over at Harris, DeVille and Associates.

Cookbook for the REALTORS® Relief Foundation!

By Louisiana REALTORS® • April 2, 2026
Louisiana REALTORS® is compiling a cookbook of Louisiana flavor with a REALTOR® heart in support of the REALTORS® Relief Foundation . And we have two ways for you to get involved:  Join us in contributing your favorite recipe using this online form. If you want to include a picture with your recipe, send to info@larealtors.org and reference recipe title in email subject. Or share your creativity by designing the cover artwork for the cookbook. A small committee will review all entries and choose one to print on the cover. Stay tuned for more details on when you can grab your own copy of the cookbook! Cover artwork and recipes are due by April 17th.

2026 Legislative Session Scoop - Week 3 Recap

By Louisiana REALTORS® • March 27, 2026
Week three of the Regular Session kept real estate issues in the conversation, even as lawmakers continued to focus heavily on workforce, tax and insurance policy. On the property tax front, measures to reshape assessments and exemptions, including proposals for a new blight rehabilitation exemption and additional relief for seniors, remain parked in the House Ways and Means Committee as stakeholders work through fiscal and local government concerns. These bills matter because they will influence long-term carrying costs, redevelopment incentives and how tax burdens are shared across residential and commercial property. Homestead related legislation, including parish level authority to increase the exemption amount, is also in the queue, signaling that the broader structure of Louisiana’s homestead system is officially on the table, not just the dollar figure. For homeowners and buyers, this debate goes directly to affordability. For local governments, it raises revenue stability and service delivery questions. There also has been movement on several identical pieces of legislation that would instruct parish assessors to develop a process for homeowners to permanently register for the homestead exemption for the duration that they own and live on the property. We are actively tracking legislation that will directly shape how investor activity and non-traditional transactions are recognized and regulated in Louisiana’s real estate market. This includes HB 468 by Troy Hebert , a key component of the Louisiana REALTORS® legislative package that targets the wholesale of residential real estate, which was heard in the House Commerce Committee on Monday. The bill is currently positioned for a floor vote early next week. As drafted, HB 468 represents a major step in the right direction for consumer protection in Louisiana, advancing needed guardrails through potential disclosure, registration, and practice standards that could redefine how assignment contracts and “off-market” transactions intersect with licensed brokerage activity. In parallel, HB 292 by Delisha Boyd passed the House on final reading, 86-3, and is on its way to the Senate. Together, these measures represent a coordinated policy effort to bring greater structure and transparency to emerging transaction models, while preserving the integrity of the traditional brokerage framework. Finally, the broader policy backdrop remains important: the Governor continues to push income tax changes and cost of living relief, while business and industry groups are prioritizing insurance, workforce and energy — each a key driver of long run housing demand and investment. As these debates evolve, we’ll keep you updated on what moves, what stalls and what it all means for your clients, your pipeline and private property rights across Louisiana. Please view the weekly bill tracking report provided by our lobbying team over at Harris, DeVille and Associates.
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