Coastal insurance is a way to protect your dream home, your summer home or your high-end investment property. When you’ve spent a lot of money to get something great, coastal insurance can keep your property protected against losing it all and can help you rebuild and make it great again in a timely manner after a disaster strikes.
What is Coastal Insurance?
Coastal insurance is what people in the insurance business call the specialized type of homeowners or property owners insurance for properties that sit within about 1,000 ft of a coastline. With coastal insurance, your property is protected against the different types of problems that are special for coastlines, which are far different than a home sitting on a regular street.
These special problems can include flooding, tropical storms and hurricanes, and even tsunamis. Most insurance companies are not interested in working with the amount of risk, or these types of risks and many companies will not insure a property that is near a coast for this reason. Coastal insurance is a type that works well for higher-end homes.
High Value, Higher Risk
In many cases when dealing with high-end coastal properties it is one size does not fit all.
Many coastal insurance companies work only with homes that are worth a lot of money. Due to being in lovely places and the nice weather in those areas, most homes near a Florida beach are worth a lot. Since there are high costs to repair or replace these high end, often custom homes, the amount of risk is much higher than there is for a more modest and inexpensive home.
Another reason why many insurance companies avoid coastal insurance policies is that there are few policies and a lot more risk. With more risk spread over fewer policies, some companies may not see a chance to profit, and shy away. While regular homeowners policies are fairly common, the relatively low number of coastal homes and their special insurance policies they need lead to higher risks to the insurance company.
Some of the more established companies offer different endorsements and deductible packages that may not be available elsewhere. You can in some cases custom tailor your coverage to meet your personal needs. Coastal property premiums tend to be much higher because of the nature of the risk’s location and value.
Carriers also have different capacity based on surplus, years in business and re-insurance backing. This is where you will see the biggest difference in the type of different coverage’s and endorsements are offered for these high-value risks.
Different Location, Different Risk Tolerance
The underwriting standards and risk level of a coastal insurance policy are different from those of a standard property owner’s policy. The issues that can damage a home that is near a coastline are broader, and damages are more likely to happen on the beach than to a more landlocked home.
While theft, fire or lightning damage can occur anywhere, there are dangers more specific to coastal properties. A more inland property is less likely to suffer damages, and do not have the special risks of a coastal home. The closer your property is to the coast, the more potential for unusual damages you will have.
Hurricanes get weaker as they travel inland, and they can damage homes up to 100 miles past the coast. While this is a long way past where your property sits, if your property is near the coastline it is going to be the first home hit when a hurricane strikes. In cases where a hurricane “nudges” the coast, not really landing but changing course and staying at sea, most landlocked structures are largely spared.
Even being close to a hurricane, as is likely for a coastal property, can be devastating. The winds and rain intensity near the coast is the worst. It is sad and expensive if your home or investment is the only one significantly damaged by a storm that leaves everything else relatively unscathed.
A tropical storm is far more than just a solid rain, as the winds still travel at a high speed. When a hurricane weakens to below 74 miles per hour of wind speed, it becomes a tropical storm. Often, this occurs when the forces that caused the hurricane are removed, such as when water and wind temperatures are closer to each other.
While a tropical storm is not as intense as a full-blown hurricane, the winds can still devastate your roof, soffits, gutters, siding. The winds can also cause debris to crash through windows. Coastal insurance can make up for this additional risk, especially because there is usually a lot more debris the wind can throw around closer to the coast.
Even though it is categorized just under “Hurricane Strength” does not mean the homeowner is out of danger. If the storm remains a named storm carriers will not even write business until the risk passes. Carriers will suspend binding authority during this time.
There is a large tidal range in many places, with the largest being the Bay of Fundy — which, while far from Florida can show you what is possible. When your property floods, all manner of damage can occur. Rotting of anything made of wood and the shorting out of anything electrical is a given. Even worse, mold and water-based life forms can be put into any space water can flow into — which is just about everywhere, even inside the walls.
Many standard homeowners policies do not account for natural flooding unless there is an extra part of the policy called a rider that is all about the flooding itself. There is a tidal range between low tide and high tide that local builders take into account. Unfortunately, tidal ranges can change at random, especially if there are heavy rains, storms that may be far away, and even the position of the Moon. If the tidal range gets longer, your home may be in danger, and coastal insurance policies are a good cover.
But there is great news in the marketplace with options of Flood Insurance other than the NFIP (national flood insurance program). We will see many options as many carriers are entering the private flood market. Some carriers are even allowing the coastal risks to add flood as an endorsement which also keeps the cost down and better coverage options. That market should keep evolving.
Benefits of a Specialized Coastal Insurance Provider
Most homeowners insurance companies do not offer anything on the level of a coastal insurance policy. Some companies that do are not prepared to properly explain this specialized type of insurance, and may not provide enough information for you to make an informed choice. When you work with a company that specializes in providing coastal insurance policies to other coastal property owners such as yourself, you are far more likely to have your questions be answered intelligently.
You need to work with someone who has experience in this field. While a natural disaster may not happen in your neck of the woods, the chance is always there. The best time to learn about and put your policy into place is before the worst happens, instead of picking up the pieces when it is too late.
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