By Joe Capers
NOAA (National Oceanic & Atmospheric Administration) has just released its 2021 Hurricane Season Forecast calling for an above average season with 13 to 20 named storms. Last year’s record setting 30 named storms only had 12 that actually made landfall.
The season is already off to a busy start, as the first named storm formed prior to the official June 1 start to the hurricane season, and in recent years, storms have grown increasingly intense.
If you own a home or investment property, you are probably aware that having the right homeowners or rental insurance policy in place is of utmost importance. Without proper coverage, you could be responsible for expensive damage in the event of a weather-related incident. In fact, as this year’s hurricane season kicks off, now is a really good time to review your homeowner’s insurance policy and make sure you are satisfied with your level of coverage.
We recommend you initially review your hurricane/wind coverage. Most policies (HO3, DP3, HO6, HO4) in Florida include either hurricane, named storm, or wind/hail under a separate deductible. Consistency of coverages is important in any policy, but this type is typically preferred. Some carriers do not write wind coverage if your home is close to the water. So, a stand-alone wind-only policy would be needed. When it comes to wind coverage, the best option is to opt for hurricane. Keep in mind there are several deductible options available that can have a large impact on what would be your out-of-pocket responsibility if you file a claim as well as the amount of premium you would pay for the policy.
Adequate Dwelling Limit (Coverage A) coverage to rebuild your home in the event of a loss is also important. Local and national data indicates that nearly two out of three homes and structures are underinsured.
The cost of lumber and other common building materials has soared in the past year as a result of supply chain disruptions and shortages, and this is the main reason new home construction has grown more expensive in recent months. As such, the homeowner’s policy that was once sufficient for your property may now fall short.
Another important coverage to review is Loss of Use that pays for you to live somewhere else while repairs are being done to your temporarily unlivable home. This also goes for rental properties with Loss of Rents coverage. To trigger this type of coverage, there needs to be direct physical damage.
An often, misunderstood coverage not offered with each carrier, but always recommended, is Law or Ordinance coverage. Most carriers, if they have it available, offer either 10%, 25%, or 50% coverage tied to your Dwelling Limit. If there is extensive hurricane damage, like we saw with Hurricane Michael, there may be new building codes you must adhere to in order to rebuild. The additional Law or Ordinance coverage is crucial to your protection, since your policy is designed to rebuild your home as it was before the damage, with similar materials and quality, and not with more costly materials that could now be required by more stringent construction codes that may have come into play.
Our coastal properties are threatened by hurricanes and tropical storms each year, and flooding can happen anywhere, anytime—even in non-flood prone areas. We encourage everyone to purchase flood insurance from the National Flood Insurance Program (NFIP), or a reputable, private flood insurance facility which may be a better flood insurance alternative to the NFIP for your home, investment or commercial property.
It is also good to remember that flood and water damage from a wind event are not necessarily the same thing. There are a few carriers who will add flood coverage as an endorsement to a home policy. For most insured homeowners, your flood policy will be a separate policy written through the NFIP (National Flood Insurance Program) or a private market, and this is the method we prefer. Unless your lender requires the policy, or you are closing on a new purchase, there is a standard 30-day waiting period through the NFIP before your flood policy will become effective. Many of the private markets in in the country, and especially in Florida, offer broader coverages than the NFIP and these should be considered as an alternative to maximize your protection.
The insurance marketplace has rapidly changed with premiums increasing, guidelines and appetites tightening and some carriers losing the ability to offer new coverages and renewals. This seems to be especially for those with older properties that are close to the water. Citizens Property Insurance Corporation, the state’s insurer of last resort is again becoming a popular and vital player in Florida. And to prepare this market with improved financial strength and capacity, the state legislature approved a $2.6 billion reinsurance and risk transfer program for the upcoming hurricane season. It includes nearly $850 million of new catastrophe bonds, which is about double the amount of last year’s cat bonds.
Insurance Zone, founded by Joe and Lea Capers, is a full service commercial and personal lines insurance agency serving Destin, Miramar Beach, Santa Rosa Beach (30A) and Inlet Beach. Visit their Video Library on www.ins-zone.com and watch several informative videos on ‘Homeowners, Condo Unit Owners and Flood’, or call 850.424.6979 and talk with one of our experienced Team Members.
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