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.