In mid September, 2018 Hurricane Florence made landfall as a Category 1 storm that lingered over the Crystal Coast for three days, disconnecting critical power infrastructure, knocking down large trees and leaving a mass of flooding throughout eastern North Carolina in its wake. Preliminary estimates in the days after the storm put the cost of damage at $1.8 billion. In the months and years since, the bills have continued to come in, and for some, recovery is still down the line. The key to a timely recovery often could be linked to what type of hurricane insurance homeowners purchased. And with all signs still predicting a higher than average number of hurricanes in the remaining months of the 2022 Atlantic Basin Hurricane season, I thought this would be a good time to examine insurance options designed to protect Crystal Coast homeowners in the event of a hurricane. In Carteret County along with many more coastal counties, hurricane coverage is too high a risk for a normal ‘homeowners’ policy.’ To get coverage for damage due to hurricanes, homeowners need to purchase wind and hail policies. These policies typically are fairly expensive due to higher risk and usually come with a named storm deductible of up to 5% of your coverage amount. There are a few policies that are actual cash value, but the vast majority are replacement cost. Most wind policies include coverage to replace your roof when it is damaged beyond repair. Typically, this also includes interior water damage from rain which has entered into the dwelling through the roof, or door, or window.
Neither homeowners nor Wind and hail policies cover groundwater. In the insurance world, once rain hits the ground, it is considered groundwater. Groundwater doesn’t always mean an overflowing pond, lake, stream or river. So, if it rains and rains and rains and your yard fills up with water and it gets into your house, you will need flood insurance to file a claim. Unlike other insurance policies designed to protect your home, flood policies are government driven, so there are some eccentricities associated with those claims. For example, it won't cover contents in a basement unless the basement is habitable. So, on the ubiquitous elevated house on pilings we have here in Carteret County, if that lower area is unfinished and you keep bikes, mowers, etc., there and it floods, those items will not be covered. Flood only kicks in at the lowest habitable floor. Furthermore, in N.C, flood policies are written in increments, so you pay a premium for a certain amount of finite coverage.
Most homeowners policies will cover wind-driven rain as long as an “opening” has been created. The most obvious is a tree falls onto the roof and a branch penetrates the roof. This opening allows water to enter the dwelling. This is covered under wind. The not so obvious is wind that blows rain between sliding glass doors or wind that blows rain in through a gable or roof vent. These typically are not considered ‘openings.’ While a high-level homeowner's policy may cover wind driven rain without an opening, the wise homeowner purchases a wind driven rain policy. That's because when insurance people sit around a table to determine who is going to pay for your hurricane claim, they always point to the insurance guy not at the table. So, you want all three guys, wind, flood and wind driven rain, at your table.
When a claim is made, most policies are going to pay actual cash value up front, and if replacement cost has been added to the policy, replacement cost is paid once the item is replaced or repaired. When determining actual cash value, typically, the age and condition of the item is considered. Most common building materials and classifications of contents have life expectancy tables. So, it may say a water heater has a life expectancy of 15 years and a shingle roof has a 30-year life expectancy. The closer your item is to its life expectancy, the more it will be depreciated and the less your ‘reimbursement.’ And this brings me to a very important conversation homeowners should have with their insurance agent and that is increased construction cost. Most agents use property estimating software that updates its price list each month so it keeps up with inflation and increased building material cost.I encourage everyone listening to this episode to look at their ‘hurricane policies’ and make sure their home/business is insured for the correct values. In a storm event, the construction cost tends to go up anyway, and when you pair that with the rising construction cost we’ve seen over the last couple of years, some homeowners find themselves underinsured.
What about deductibles? On a normal policy, you have a named storm deductible and an All Other Peril Deductible (AOP). Named storm deductibles are normally 1-2% which is a percentage of your dwelling coverage. Ex: If your home is insured for $300,000, your named storm deductible is $3,000. If it is a tropical storm or hurricane, the claim will fall under your named storm deductible. If it is a fire, lightning, etc. then it falls under your AOP deductible. Depending on how your policy is written, generally speaking, wind (waterspouts, tornados, nor’easters) will fall under your AOP deductible. AOP deductibles can range from $500, $1,000, $2,500 or higher. It is up to the insured which deductible they prefer. The higher the deductible, the lower your premium typically is.
If you need to file a claim, you can call your carrier’s claim number directly, or you can call your agent’s number. Have your policy number at the ready and the date, time and description of what happened and where the damage is. Remember, It is your responsibility to safeguard your property to prevent further damage such as placing a tarp on the roof if you have a leak. Take pictures and save any receipts. The next step is to wait for an adjuster to move the claim forward. In the meantime, it’s a good idea to obtain an estimate from the contractor you would like to use. I want to leave you with two final observations. First, do not wait until a hurricane is here to get coverage. Most if not all carriers will not write coverage once a storm is named. Second, all flood insurance has a 30-day wait for coverage to commence. To learn more about insurance options to protect your home and property, go to my website, www.EmeraldIsleHomesforSaleNC.com and sign up for my blog. Ready to buy or sell? Call me at 919-308-2292. Explore the video tab for my weekly uploads to my YouTube channel. Subscribe to my YouTube channel and receive free donuts at my Flip Flops Donut shop. Text your email address to 919-308-2292 and subscribe to my newsletter. My book, "Live Where You Vacation" is available on Amazon.com or at Kindle.
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