New Changes to Coastal Homeowners Insurance

Now the insurance situation, is more dire not just for new homebuyers but for existing homeowners too. In between bites, I reminded Anne-Marie about how Hurricane Irene in 2011, and the big momma, Hurricane Sandy in 2012, gave insurance companies greater insight into number of homeowners risks they insured in certain areas. And it is these new insights which have given rise to newer realities in homeowners insurance.

It’s amazing. Whenever I read or make a presentation about the new changes happening in coastal  homeowners insurance here in New York State’s Downstate Region, (Brooklyn and the four boroughs, Nassau, Suffolk, Westchester counties), I usually run into one of Brooklyn’s leading real estate brokers the very next day. And they wrangle a free lunch out of me.

Talking Coastal Homeowners Insurance with Anne-Marie Stanislaus of Reserved Realty LLC

Late last month, I had the pleasure of enjoying another terrific pizza with Anne-Marie Stanislaus, one of New York City’s leading independent Real Estate Brokers, and the Owner and Principal of Reserved Realty LLC.  We met at the number-one Italian restaurant in Prospect Heights, the world-famous Cataldo’s Italian Restaurant and Pizzeria, at 554 Vanderbilt Avenue, between Dean and Bergen Streets. The first question she asked was “Eustace, I know we talked about this last year, but what’s going on with the coastal homeowners insurance business in Brooklyn? Companies are not just refusing to write certain types of houses. I’m getting calls from clients complaining their insurance companies, after decades without claims or late payments, are cancelling policies in certain areas like they had the plague! And not just in Brooklyn, mind you, but throughout the Downstate region.”

We’d had a similar discussion back in November of 2012, right after Hurricane Sandy, which I detailed in an earlier post, “Coastal Homeowners Insurance, Part 2.9.” Back then, when life seemed simpler,  we were more concerned about changed real estate practices as it pertained to new sales.

The Latest Twist In Coastal Homeowners Insurance

The insurance situation is becoming more difficult not just for new home buyers but for existing homeowners too. In between bites, I reminded Anne-Marie about how Hurricane Irene in 2011, and the big momma, Hurricane Sandy in 2012, gave insurance companies a major case of the willies and greater insight into the number of coastal homeowners insurance risks they insured in certain now-hazardous areas. It is these new insights which created newer realities in coastal homeowners insurance.

Take It Back A Mile

First, when certain companies decided they no longer wanted to insure risks within one (1) mile of a tidal coastline, they just sent the affected policyowners a letter which basically said, “Thank you for being our homeowners client for the past  15, 20, or even 30 years. We also appreciate your not presenting us with any claims during your years with our company. We changed our underwriting guidelines, and since you no longer fit or match them, you’re no longer one of our homeowners insurance clients effective (You fill in the date.).

“Thank you, and don’t worry, you can still keep your auto, life, and whatever else you have with us. We just don’t want the house anymore.”

Now, just for the record, while most insurance companies pulled their coastal boundary line to a distance of at least one mile from the tidal coastline for dwellings, there are those companies who will continue to honor their commitment to their clients, so long as they don’t lapse their policies, submit some really dubious claims, or decide they can make some side money by turning their legal two-family home into an illegal three, four, or even more family house.

Many companies, however, are simply dropping their clients, and, just like that, the homeowner must seek and secure new coverage for their home.

There’s a new twist in this tale of woe, however: Now some insurance companies are cancelling policies if they are within one mile of any body of water.

For example, I’ve recently written a new policy for a homeowner who lives more than one and one-half miles from the tidal coastline, but within one-half mile of the tip of Brooklyn’s Paerdegat Basin.

A property on the western side of Flatlands Avenue. One which suffered absolutely no wind or flood damage during Hurricane Sandy.

He recently received a cancellation letter letting him because of changes to what the company felt was a coastal risk, his policy was being non-renewed. A policy he’d had for 28 years. Claim-free.

And now, I’m going to write his neighbor a policy, since the same company just sent him his non-renewal letter.

So Anne-Marie looked at me like I had two heads. “So wait a minute,” she asked. “Now we’ve got to know how far a property is from any body of water before we try to market it? When will this madness end?”

“Who knows? Probably when enough disaster-free and thus heavy-claim time passes. ”

She looked at me and said, “Well, that’s not so bad then.”

“Sure”, I said, “Even though when FEMA finishes remapping this region, probably either in late 2014 or by mid-2015,  mandatory Flood Insurance policies with premiums in excess of $2,000 and $3,000 will create new problems for homeowners now remapped into AE and VE zones…”

“Enough!” she yelled. “For that Greaves, I want more pizza! And no more insurance talk!”

And the second pie was even tastier than the first.

You can reach the beleaguered  Anne-Marie Stanislaus at 917-887-7468. She and her team at Reserved Realty will do a fantastic job of  either helping you find your dream home, or marketing your current home and apartment rentals. You can always reach Eustace Greaves Jr., LUTCF  by telephone at 718-783-2722, or send him an email to Eustace@insuremeeg.com.

Read Your Homeowners Insurance Policy | Brooklyn Covered

Why did they think their flood losses were covered? I’m sure their insurance agent didn’t tell them they were covered. Heck, I inform each and every one of my clients about the need for flood insurance, even if they live in the middle of Bedford-Stuyvesant, Crown Heights, or Prospect Heights. The usual response? I usually get a “Oh, I don’t need that. I’m not near the water.”, or “Why are you trying to take more money out of my pocket? I can’t deduct you on my income taxes!”

Read Your Homeowner’s Insurance Policy.

It’s amazing. We nearly go over the fiscal cliff, people are still without heat, hot water, or even a home,  and lawmakers in New Jersey propose legislation to make insurance companies produce a single-page summary of a homeowners insurance policy.

This bill, A-3642, produced by the Financial Institutions and Insurance Committee, would require insurers writing homeowners insurance policies in New Jersey to provide each and every insured with a consumer-information brochure “written in a simple, clear, understandable, and easily readable way”, explaining the hurricane deductible and the need for flood insurance.

What a bunch of garbage. Just read your homeowners insurance policy.

Now, I don’t know about homeowners insurance policies in New Jersey, but here in New York, the second page of the homeowners policy covers Policy Deductibles, including the Hurricane Deductible, and tells the client their homeowners or dwelling policy does not provide coverage for losses caused by flood or mudslide.

It even gives you the short definition of what a flood is.

Don’t believe me? Well, here’s the renewal homeowners insurance policy of one of my long-time clients:

Homeowners Insurance Declarations Page One
Homeowners Insurance Declarations Page One

 

Homeowners Insurance Policy Declarations Page Two
Homeowners Insurance Policy Declarations Page Two

My client and I speak every year, and every year I remind them of the need to purchase Flood Insurance. (Heck, we’ve got to increase the Liability Insurance too.) As you can plainly see, page two of the policy clearly describes the Policy Deductibles, including the Hurricane Deductible, and even states there is no coverage for losses caused by flood or mudslide in the bottom half of the page.  It even reminds you who your insurer and mortgagee are.

It’s not that it isn’t there. Policy owners just don’t read it.

After 30 years in the insurance business, I know one hard truth: Ninety-five percent of all policy owners will never read their policy (ies) until, and only when, they suffer a loss. And they’re told they’re not covered for what caused the loss. Then, and only then will they actually take an interest in their policy coverages.

Oh, and this is when they tend to get really ticked off.

Look at what happened with Hurricane Sandy. How many people, either while evacuating, or remaining trapped in their homes, shared the mistaken belief their homeowners insurance policy covered them for losses caused by flood? Only to get the shock of their lives when they learned their homeowners insurance policy offered them zero (0) protection for their losses?

Too dang many.

Why did they think their flood losses were covered? I’m sure their insurance agent didn’t tell them they were covered. Heck, I inform each and every one of my clients about the need for flood insurance, even if they live in the middle of Bedford-Stuyvesant, Crown Heights, or Prospect Heights. The usual response? I usually get a “Oh, I don’t need that. I’m not near the water.”, or “Why are you trying to take more money out of my pocket? I can’t deduct you on my income taxes!”

I remind them they’re not covered for flood, which includes the water flooding your basement after a heavy rainstorm, or when the 90 year-old water main running down the middle of your street finally decides to burst and send hundreds of thousands of gallons of water cascading into your basements and cellars.

What’s really sad is it’s not just insurance policies which consumers don’t read. Recently, a client purchasing a condo came in for insurance. During the conversation, the client made statements leading me to believe they thought didn’t have to pay for any necessary repairs  done in their unit.

Luckily, the client had Offering Plan with them which provided not only a drawing of the unit, but the condo association rules and regulations as well.

With minimum effort, I showed the client where repairs to their unit were their responsibility.

Lord, why did I do that?

“They didn’t tell me anything about that!”

“Didn’t you read this Offering Plan from cover to cover?” I asked.

“Man, I couldn’t be bothered to read that whole book. You’re looking at it. What does it say?”

And therein lies the problem.

Real Housewives of Atlanta or L. A.? We’re all over it.

The Voice and American Idol? We’re watching every stupid episode.

Watching virile athletes vie for athletic glory? Sure, while filling our kegs with booze from a keg.

Reading trashy romantic novels, getting all sweaty over the sex, while your sexually frustrated man (or woman) is lying next to you, waiting for you to read their pages?

Heading for divorce court.

But ask someone to read, question and understand their condominium association’s Offering Plan? Or read the two (2) pages of their policy called the Declaration Pages?

Can’t be so bothered.

Hated it. Two snaps down in the deepest, dankest, dungeon.

Now, this sad state of affairs does not apply to every client. It just applies to too darn many.

I am blessed with more than a few clients who meet with me every year for their annual  homeowners insurance policy review. They want to make sure they own all the coverages they need to be fully indemnified in case of a loss. They may not enjoy being told it’s going to cost them a little more, but most of them upgrade their coverage.

Most important, they know what is covered and what is not.

And, at the end of the day, isn’t that what counts?

So, don’t make insurers kill more trees. Tell policyowners it’s their responsibility to read their policies. If they don’t understand what they are reading, then they should call their agent and set up an appointment to review their insurance policy (ies). Heck, they should do that every year.

So, save the trees! Read your policy!

 

Coastal Homeowners Insurance, Part 2.9 | Brooklyn Covered

While these and many of the usual features are important, they now take a back seat to a new and sobering reality; the ability to purchase affordable and good insurance coverage is first based on a property’s proximity to an insurance company’s recognized coastline.

Finding Coastal Homeowners Insurance Is The New Normal

When it comes to purchasing affordable and comprehensive coastal homeowners insurance, your home’s proximity to the coastline is the most important location characteristic.

I recently had the opportunity to speak with prominent Brooklyn real estate broker Anne-Marie Stanislaus. Anne-Marie, who can be reached at 917-887-7468, holds national certification as a Certified Distressed Property Expert. We spoke about which factors, or characteristics make a home more desirable.  According to Anne-Marie, a property’s location to certain amenities can sometimes be what makes or breaks the sale.  Anne-Marie listed several characteristics of  good property location:

  1. Transportation: In New York City, being near a dependable subway line, especially one with express service into Manhattan, and to Brooklyn’s Downtown Business Hub is a no-brainer. Unlike those commuters in say, Westchester, Nassau, Suffolk, or from points of origin in New Jersey and Pennsylvania, you eliminate the absolute need for a “station car” just to get to the first leg of your transportation day. When you throw in  an express station, and good surface bus service, you’ve got the makings of a winning property.
  2. Shopping:  Proximity to good supermarkets and farmers markets is desirable. This can also eliminate or reduce the need to use a car for food shopping. Add a mall or shopping center where you can get everything for your home, your clothes dry-cleaned, your shoes repaired, and your prescriptions filled,  and the property often becomes even more desirable.
  3. Some home buyers opt for the solitude or isolation of a more remote destination. They may own a home-based business requiring only a few trips into the city for client meetings each month.
  4. Good schools: This ranks high on the list of many young couples. Access to  excellent local public schools permits families to save more for their children’s college educations.

The New Normal

While these and other features are important, they now take a back seat to a new and sobering reality; the ability to purchase affordable and good insurance coverage is based on a property’s distance from the coastline.

You always wanted to buy a home with ocean, lake,  or river views. Ah, you thought, the peace of mind and serenity such views and lifestyle would afford me. Until you live and suffer through natural events like Hurricanes Irene and Sandra and Tropical Storm Lee. Then living near a surging ocean, or overflowing lake, or raging river won’t seem so peaceful.

Many homeowners insurance carriers now understand the risk of insuring coastal properties.  Agents and brokers for these companies will no longer bind homeowners or dwelling insurance coverage for properties within one mile of the coast.  (The coastal rules for condo, coops, and rental units are usually less onerous; ask your broker for their companies rules for these properties).

As an independent agent and broker, that requirement doesn’t pose any real problem for me.  I am able to  place my coastal homeowners insurance business with several good companies who are comfortable with this type of risk. One caveat: you will pay, on average, anywhere from one-half to two times as much for a coastal homeowners insurance policy as you would for the exact home more than a mile away from the coast.

Remember, in insurance, it’s all about the amount and type of risk a company will accept. So, should you present a greater risk, you will pay more for coverage. This is just a new reality many homeowners and home buyers must accept for homes in certain locations.

Companies’ Right To Decide

Every insurance company has the right, , with state approval, to decide where it will and will not offer coverage.

When an insurance company changes its underwriting policies for coastal properties, and then non-renews customers with homes are now in the exclusion zone, those former clients may face difficulty securing new coverage. (See my upcoming blog post about the ” Rule of 60/3 and 2/5″). The same customers who placed their auto, and in some cases, life insurance with a company they thought would be their insurer for a lifetime.

I think it’s wrong to simply dump loyal customers. My suggestion? Let those who are now insured with your company keep their coverage, so long as they pay their premiums and have a good claim history. Adjust premiums and require larger hurricane deductibles to account for the increased risk. If a client chooses to not agree to these changes, they can search for new coverage. Otherwise, replacing homeowners insurance policies in the coastal regions of Brooklyn and the rest of this region will be absolutely devastating for many homeowners. Personally, I don’t mind driving a few miles to reach the  beach. During the last decade, while watching ocean levels rise, and protective wetlands disappear, I tried to warn against the folly of  building and buying coastal properties. To me, it was always a game where Mother Nature ultimately wins.  Some homeowners will always choose a seaside, lakeside, or riverside home. They will, however, pay higher homeowners insurance premiums for their choice. 

For insurance purposes, your first location characteristic question should be  “Is this house at least one to one and one-half miles from the coastline?” Also, make sure to ask the agent or broker who’ll be insuring your home whether the homeowners  insurance company providing coverage will honor renewals should their coastal underwriting rules change.

If you now own a home within more than one and less than two miles from the coastline, you are entitled an answer to the latter question. If the answer is either an emphatic “No”,  or a weak “Yes, I think so”, now’s the time to start searching for a new homeowners insurance company. Otherwise, you may face the task of  buying a new coastal homeowners insurance policy sooner than you realized.

Then, as I mentioned to Anne-Marie Stanislaus, you can worry about schools, transportation, shopping and the like.

Location, location, location, indeed.