Considerations for Homeowners on the Coast

As we make our way toward the midway point of the annual hurricane season, consumer questions regarding coastal properties are on the rise. Hurricanes make great TV. When you get past the hype that the media can bring to storm season, they actually provide a valuable service to the insurance industry. They get people calling to check on their coverage. There is no better opportunity for an insurance professional than when the public calls, seeking advice and answers.

To better prepare you for those opportunities; it seems appropriate do a quick refresher on major considerations for writing coastal property.

Wind Coverage

Obviously the biggest issue is wind coverage. It may be that a homeowner has wind coverage included on their primary policy, perhaps they are part of a wind pool or maybe the homeowner has standalone coverage. However if a customer is asking if they have wind coverage, then they are asking the wrong question. Having wind coverage is one thing, understanding how it works is quite another.

As the homeowner’s trusted advisor, your job is to help your customers understand how coverage applies when the wind blows. Some key points to discuss are:

Deductible. Does the homeowner have a percentage or stated policy deductible? If a percentage, is the percentage based on TIV or Coverage A? Is there a named storm deductible? Homeowners need to understand how all these issues apply at the time of a loss. You don’t want to explain a percentage deductible after a loss.

Is the wind coverage enough to cover the full replacement cost of the home? If not, an excess wind policy should be considered.

Know what you’re selling. There can be big differences in wind coverage from one carrier to another. If you don’t write a lot of coastal business, take some time to review the forms before you make recommendations. Appetites, rates and guidelines can change much faster in the coastal market than the standard market.

Insurance to Value, Building Codes

ITV can be a frustrating issue for agents and consumers in any part of the country. Discussions around replacement cost and market value only get worse in today’s struggling market. However, accurate ITV becomes much more important in coastal communities for a number of reasons.

To avoid problems, be sure you have a recent replacement cost estimator for each of your coastal homes. Is the home written to full replacement cost?

Do you know the value differences in the particular area you are insuring? Even if only a few miles apart, there can be significant differences between coastal and inland homes.

Does your client’s coastal policy have a coinsurance clause? If so, are they properly insured to avoid a penalty?

Another potential pitfall can be building code changes that leave your customer uninsured or underinsured at the time of a loss. Building codes in coastal areas can change frequently and dramatically. To be certain that your clients have the money needed to stay current with ever changing regulations, consider these two points.

Does your client’s policy contain building ordinance and law coverage? If so, do they have enough coverage for a total or near total loss? Another good reason to have an updated inspection!

Can your clients purchase additional ordinance and law limits? If so, are they aware of this option?

Choose the Right Partner

Choosing the right partner to make good on that promise in coastal areas is a decision you should not take lightly. The stakes are higher in coastal areas. You not only need a carrier with the financial wherewithal to pay the claims, but they must also possess the experience and expertise to handle a widespread, catastrophic event.

Know the rating of your partner. Ratings can vary in this market segment. Make sure your partner can withstand the financial impact of a major loss.

Have some understanding of their claims process. Do they have a history of paying catastrophe claims? Do they have the staff to handle a large influx of claims? Does the carrier have a disaster plan? How quickly can the carrier respond after a loss?

There are many things to consider when writing property insurance on the coast. With some advanced work on your part, you can help ensure that if your coastal clients can’t stand up to the storm, they will be able to stand again after the storm.