Waterfront Homeowners Weather High Insurance Costs After Major Storms

Calvin and Elizabeth Moore weren’t concerned when they learned that their Pensacola, Florida home was on the path of Hurricane Sally. They had upgraded the roof and windows after Hurricane Ivan damaged the property in 2004.

However, the 2020 storm was stronger than expected and caused significant damage from a leaky roof, retired real estate agent Moore, 79, said. They could have their antiques, art, and furniture safely removed and stored while the workers in the house repainted and dealt with mold. They slept in the sitting area next to their kitchen for months.

To cover roughly $ 300,000 in repair costs for their 4,000-square-foot home that faces the water on three sides, the couple added their own funds to the insurer’s payouts, which they added after the previous storm and after one second insurers were finally picked and stopped to cover their area. Their $ 1.5 million Pure policy, including a flood damage driver, covered approximately $ 200,000 in damages. Mr Moore said he paid the contractor a $ 37,000 deductible and plans to spend $ 70,000 on repairing his torn back yard that isn’t covered.

After Hurricane Sally in 2020, Calvin and Elizabeth Moore repaired their waterfront home in Pensacola, Florida using a combination of flood insurance payouts and their own funds.

(Calvin Moore)

“It’s work in progress,” he said.

The Moores have been diligent in terms of adequate coverage, which costs them about $ 28,000 annually. Typical home contents insurance does not always cover costly storm damage such as flooding for high-quality property on the coast and on the water. Many luxury homeowners like the Moores are turning to a small but growing sector of private insurers who offer additional policies to fill the gaps.

“It’s a very bad experience for consumers. many houses [are] get in unfair situations, ”said Nick Steffey, general manager of ShoreOne Insurance Managers in Dedham, Massachusetts. Founded in 2019, the company offers flood insurance for coastal homes, usually as a supplement to homeowner insurance.

Currently, most homeowners in FEMA-designated flood areas are covered by the national flood insurance program administered by the Federal Emergency Management Agency. It covers damage up to $ 250,000. FEMA provides additional funding when a disaster is reported.

However, the program cap means that high-end homeowners often have significant expense expenses. Many are also underinsured because FEMA’s risk estimates may ignore damage from nearby waters or from strong storms, says Jeremy Porter, director of research and development at the First Street Foundation, a nonprofit advocating greater transparency about flood risk and climate change begins.

The photo shows the destruction in Mexico Beach, Florida, after Hurricane Michael in 2018.More and more insurers are offering homeowners connections with specialist contractors when the demand for a storm increases. The photo shows the destruction in Mexico Beach, Florida, after Hurricane Michael in 2018.

(Scott Olson / Getty Images)

“One of the biggest problems is assessing flood risk,” said Dr. Porter. In the next 30 years, economic damage due to changing environmental conditions is estimated at 7.5 times the current average insurance payout from 4.5 to 4.5 times, according to the First Street Foundation.

Tom and Kim DiBacco worked with Tower Hill, their insurance company, for months on repairs to their 6,000-square-foot home in Panama City Beach, Florida after winds at 160 mph from Hurricane Michael blew their chimney away and let water in. The $ 1.3 million exterior damage to the house included replacing parts of their pool, said DiBacco, 58, a wine and liquor retailer who bought the house in 1997 for $ 515,000.

“That wasn’t welcome,” he said. “It was kind of insane.”

The couple had already replaced the roof and floor after a storm in 2016. These repairs included converting a study into a wine cellar.

After negotiating their insurance, which had separate drivers for flood and storm protection, the couple received nearly $ 245,000 in damage, including living expenses, if they had to move out of their home after the work was done. They rebuilt the fireplace and wall that had shifted in their two-story living room, installed new windows, and repaired the water damage in the main bathroom of the house.

Teri and Jim Wyly outside their home in Bay St. Louis, MissTeri and Jim Wyly outside their home in Bay St. Louis, MS, cost them $ 700,000 in repairs after it was damaged by Hurricane Katrina in 2005.

(Jacqueline Marque for the Wall Street Journal)

Since then, the couple’s annual insurance premium has risen 30% to around $ 9,000, he added.

High-end homes have additional policy challenges, says Bo Williamson, a Panama City Beach public expert who worked with the DiBaccos. “The cost of repairing high-end homes varies widely,” he said.

For one thing, he said, insurers often fail to take into account the real cost of replacing expensive finishes. You can also deny cover if there are multiple causes of damage such as wind, flood, and fire. He suggests that owners create videos to document the condition of their home before an event occurs.

When Hurricane Harvey landed in 2017, Laura Manchee’s 1950s one-story house in Bellaire, Texas was completely destroyed by flooding. She combined NFIP insurance and $ 60,000 content policy to speed up the recovery process and get some sort of down payment toward her plans to rebuild bigger and better. Agreeing to raise the new home 53 inches above the floodplain enabled her to get additional insurance at a lower cost, she said.

The interior designer spent two years rebuilding the home, which is now more in line with the newer million dollar homes in the neighborhood, she added. The family of four expanded their space to three bedrooms to 3,900 square feet compared to their 1,400 square foot original.

“We really liked the modern, prairie-style aesthetic,” says Ms. Manchee, who installed a stained glass window from the living room on the second floor of the new house in the original post-war building. She declined to estimate her construction costs.

Her annual NFIP flood insurance, which included household items, cost her $ 1,800 for her previous home, but her annual cost dropped to $ 600 for the same coverage in her new home due to the amount.

In response to the high demands, many insurers are expanding their services and becoming more specialized, said Ross Buchmüller, Managing Director of Pure Insurance. They provide the ability to expedite connections to roofers, mold reducers, energy producers, and alternative residential buildings as the need for services in an area increases.

“Everyone is much more complex [claim] happens at the same time, ”said Mr. Buchmüller. Pure recently acquired an art curation firm to help clients better protect expensive pieces during a storm, he added.

“We really liked the modern, prairie-style aesthetic,” says Ms. Manchee, who installed a stained glass window from the living room on the second floor of the new house in the original post-war building. She declined to estimate her construction costs.

Her annual NFIP flood insurance, which included household items, cost her $ 1,800 for her previous home, but her annual cost dropped to $ 600 for the same coverage in her new home due to the amount.

In response to the high demands, many insurers are expanding their services and becoming more specialized, said Ross Buchmüller, Managing Director of Pure Insurance. They provide the ability to expedite connections to roofers, mold reducers, energy producers, and alternative residential buildings as the need for services in an area increases.

“Everyone is much more complex [claim] happens at the same time, ”said Mr. Buchmüller. Pure recently acquired an art curation firm to help clients better protect expensive pieces during a storm, he added.

———

Use of risk tools

Buyers are often in the dark about the flood risk of their new property. However, new tools are available to understand property risk assessment and determine flood coverage. But it can cost you.

Last year the First Street Foundation, a nonprofit, launched Flood Factor, a model that takes into account the widespread nature of flood risk. It is estimated that there are around 70% more flood-prone properties than those found by FEMA. Homeowners can browse the website by entering their address.

Most buyers and mortgage lenders rely on FEMA’s Flood Insurance Interest Card when assessing flood risk. Lenders often require buyers in these designated areas to purchase flood insurance.

Advances in technology, including higher resolution topographic imagery, make it easier to understand risk, says Nick Steffey, general manager of ShoreOne Insurance Managers in Dedham, Massachusetts.

This fall, FEMA will launch its Risk Rating 2.0, a revision to flood insurance that will increase rates for many high-end homeowners under the National Flood Insurance Program. Rather than relying on the elevation of a property in existing flood maps, the new method also includes variables such as flood frequency, flood types such as river overflow and distance to a water source, a FEMA spokesman said.

Tony Rodriguez-Tellaheche, co-founder of Prestige Realty Group in Miami, advises buyers to discuss flood insurance with independent agents to better assess their risk. He refers customers to a broker at the beginning of the buying process as the additional premium gives a more realistic view of how much the house will cost to maintain.

“Buyers need to be aware and ask what these flood costs are up front,” he says.

Comments are closed.