Coastal Homeowners Insurance

By Rebecca Walters

IN LIGHT OF THE RECENT HURRICANES AND TROPICAL storms that have devastated much of the Southeastern United States, homeowners in the Carolinas might be wondering just what is and what is not covered in their homeowner’s insurance policies and whether or not they have enough insurance.

Rather than learning the hard way—after a disaster has occurred—industry experts say that “better safe than sorry” is always the best policy when it comes to properly insuring their dwellings and its contents. And with weeks left of the 2005 hurricane season, there’s still time to get prepared.

“Hurricanes Katrina and Rita should serve as a wake-up call to all homeowners,” says Eleanor Kitzman, director for the South Carolina Department of Insurance. “I urge each of you to conduct a thorough review of your property and contents, prepare a video or written inventory of your personal property, and sit down with your insurance agent and review your homeowner’s and other insurance policies so that you know what’s covered before a storm hits.”

A basic homeowner’s policy covers events that cause damage to property such as fire, windstorm or theft. The more perils the policy covers, the higher the cost of the policy. Most insurance policies provide similar types of coverage but there are differences.

When purchasing a home in a coastal area, what most people, especially those moving from other parts of the country such as the Midwest, don’t realize is that no homeowner insurance policy covers flooding, according to North Carolina Department of Insurance Commissioner Jim Long.

Flooding is defined as any rising water. If you live along the coast, of course there is a greater risk of flooding. Regardless of whether you live along the coast or several miles inland, industry experts advise consulting with your individual insurance agent about the National Flood Insurance Program, a federal program through FEMA that will sell you a flood policy. Speak with a municipal government representative or a local insurance agent to learn if your property is located within a flood plain.

In both North Carolina and South Carolina, insurance companies have the right to refuse coverage based on risk

. “Insurance protection can come in different packages when you own coastal property,” Long says. “The traditional company, such as State Farm or Allstate, may not be willing to write a policy for your home on the Outer Banks, for example. Or they may only cover your home for specific damages not related to wind.”

If this is the case, North Carolina has a program called the Beach Plan that is available through the North Carolina Joint Underwriters Association, specifically to provide coverage for properties considered high risk. While it may cost more, you will at least get the coverage you need, says Long.

South Carolina has a similar program in place, called the Market Assistance Program, for homeowners having difficulty obtaining insurance, says Ann Roberson, executive assistant to the director and public information officer for the South Carolina Department of Insurance.

Homeowner’s insurance policies in North Carolina are standardized, or regulated, in terms of rates and language by an outside third-party agency that represents all insurance companies. Basically what this means to consumers is that there exists a cap, or maximum fee, that homeowner’s insurance companies can charge, says Chrissy Pearson, director of public information for the North Carolina Department of Insurance.

Roberson says this type of regulation does not exist in South Carolina. However, in order to raise rates or change the language in policies, an insurance company must first get approval from the South Carolina Department of Insurance.

In coastal areas, consumers will pay higher premiums based on whether they live to the east of the Intracoastal Waterway (along the coast or on a barrier island, such as Hilton Head Island) or to the west of it. So when purchasing a home keep this in mind.

When shopping for insurance be sure to ask about the deductible, flood insurance and replacement cost coverage, says Wendy Harvey, personal lines manager for Coastal Plains Insurance on Hilton Head Island.

Homeowners also should be aware that some insurance companies now require policy holders to pay a percentage (varies by company) of the total value of their policy before they will settle a claim, Harvey says. Depending on your coverage amount, this could cost you tens of thousands pre-settlement dollars.

Property damage coverage pays for loss or damage to your home, its contents (like your furniture, TV, clothes and jewelry) and detached buildings on your property (like a garage or tool shed). There will be a deductible with each property claim. A deductible is the amount you agree to pay out of your pocket for losses before your insurance company begins to pay.

The amount of coverage is based on the type of policy you buy—actual cash value or replacement value. Actual cash value means payment is limited to the depreciated value of each item at the time it is damaged, destroyed, or stolen, up to the total limit of the policy. Replacement cost coverage, which is not available on all policies, means brand-new items would be bought to replace or repair your home and/or its contents.

Harvey adds that consumers should inquire about obtaining extra coverage for building ordinance changes. If a home is not up to current building code, the cost to rebuild at those standards could be significantly higher. As such it makes sense to be covered, she says.

Generally, a basic homeowner’s policy covers the following:

· The house/dwelling and attached structures.

· Other structures located on the premises if they are not used for business or rented to others. The amount of coverage is usually limited to 10 percent of the dwelling amount, but increased limits may be available.

· Personal property (contents) owned or used by the policyholder anywhere in the world. There are limits to the amount of coverage. Also, certain kinds of property are excluded from coverage such as birds, fish and animals, jewelry, aircraft, etcetera. Be sure to read your policy to see what is limited or excluded. You may need to buy specific insurance to cover certain items.

· Additional living expenses for the payment of the extra expense above one’s usual cost of living if the policyholder’s house is damaged by an insured peril and if he is required to live elsewhere while the house is being repaired.

· Personal liability for sums which you may become legally obligated to pay, such as damages for bodily injury or property damage to other people caused by the policyholder’s negligence. For condominium owners or apartment or house renters, personal property, additional living expenses, personal liability and medical expenses are covered.

There are three major factors that determine the premium to be charged for insuring your home.

They are:

· construction of the dwelling;

· quality of fire protection available in the area in which the house is located;

· the area of the state in which the house is located.

Coastal Carolina is divided into three primary geographic territories based on exposure to windstorm damage: inland, seacoast and beach. However, insurers may further subdivide these territories based on loss experience or other factors.

“Risk can’t be eliminated and, if it could, there would be no need for insurance,” Kitzman says. “But it can be managed through a variety of means. Rigorous building codes are the heart of a serious mitigation program and South Carolina has been relentless in upgrading and enforcing its codes, both residential and commercial, especially in coastal communities.”

Obtaining homeowners insurance can be confusing, but there are people out there who can help answer your questions. Start by calling your local insurance company. For additional assistance in North Carolina, call (800) 546-5664, or go online to www. ncdoi.com. In South Carolina, call (800) 768-3467, or visit www. doi.state.sc.us. For more information about the National Flood Insurance Program (NFIP), go to www.fema.gov.

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