Living on the coast of New England has always had its advantages: proximity to the beaches, the memorable sunrises/sunsets, and cool ocean breezes in the summer. Offsetting these advantages, however, are new challenges in insuring a home wherever these breezes keep you cool during the dog days of summer.
Why do they cost more?
Insurance companies’ concern with coastal homes is not about floods (flood damage is excluded, and needs to be insured separately). It’s the wind. Wind can knock down trees, phone and electrical lines, and damage roofs, exposing the rest of the house to rainwater and related problems. Wind poses a “severity” concern too, since one storm can generate large losses for many companies throughout a broad region. Not surprisingly, reinsurers (who provide catastrophic insurance for insurance companies) are demanding new restrictions on how coastal property owners participate in their own losses.
How are insurance companies dealing with this?
To moderate severity geographical concentrations, and to provide incentives to homeowners to protect against wind damage, most companies are imposing mandatory wind deductibles, near the coast. These are distinct and separate from your standard deductible. There are two categories, and the distinction can be important: “Named Storm” deductibles apply only to claims arising from a Named Storm (i.e. Class 3+ Tropical Storms & Hurricanes). A broader “Wind/Hail” deductible, applies to any wind/hail loss. When given the choice, a Named Storm deductible is preferred, simply because it won’t apply as often, such as on damage from winter nor’easters or summer thunderstorms… or the notorious “No-Name” perfect storm.
How much is this costing me?
These new deductibles are usually expressed as a percentage of your dwelling (house) amount, and range from 1% to 5% depending on location and a company’s existing exposure. For example, a 2% wind deductible on a home insured for $250,000 translates to $5,000, a significant amount to “self-insure”. Distances generally dictate the amount you share: less than 1000 feet from the shore (3% – 5% wind deductibles common), 1000’ —2500’ (2% common), 2500’ to 1 mile (“named storm” deductibles become available), and 1– 5 miles (more markets, more choices become available).
Can you avoid a wind deductible if you’re within these ranges?
Sometimes. Contact Andrew Gordon Insurance for home insurance solutions that fit your budget and your tolerance for risk at our website. Get a coastal home insurance ebook here.