In the months of June through November, areas off the Atlantic coast of the United States have the potential to be hit with hurricane force winds.1 Hurricane force winds are considered wind gusts sustained at 74 mph according to the National Weather Service. The estimated value of coastal properties that are vulnerable to hurricanes exceeds $10.6 trillion in the United States alone.1
With hurricane season upon us, Insurance Market Source approached industry experts to share their insight on how brokers and agents can help prepare clients for the peril of a windstorm.
1. Ensure proper coverage
“Especially, in coastal counties, it is important to know if the client is covered for wind and if so, knowing the deductible,” said Donna Dodd, Vice President, Personal Insurance, Burns & Wilcox, Corporate Headquarters. “Deductibles are usually calculated at a percentage of the insured value of the dwelling.”
Currently, 19 states have hurricane deductibles.2 Depending on the area, some deductibles may be as high as 10 percent. As an example, if a Florida home insured for $1 million with a 10 percent hurricane deductible experiences a hurricane related loss, $100,000 will be deducted from the insured’s claim settlement.
John Heaner, Senior Underwriter, Commercial Insurance, Burns & Wilcox, Tampa, Fla. says that, “Policies can include various wind-related deductibles, such as a named storm, all other wind, or all other peril. However, many carriers are changing their appetite and brokers can attain historically low deductibles for clients right now.”
For deductibles that are high, Wind Buy-Back insurance is available to help save clients thousands in the event of a claim. For a premium, clients can buy down an increment or two from their current percentage.
“Since it has been a while since a major hurricane, now is a good time for brokers to shop for better terms for their clients,” said Amanda N. Ruppel, Managing Director, Burns & Wilcox, Tampa, Fla.
2. Know the language of Wind/Excess Wind policies
Even if a client has a Wind or Excess Wind insurance policy, it is important to know the language within it.
“Wind-driven rain is generally covered under these policies, but flood is not a covered peril. Where clients are subject to storm surge or flooding from torrential rain, they need to be encouraged to obtain a flood policy,” said Dodd. “This prevents a dispute in the event of a claim of whether any damage was a wind or flood event.”
3. Know the limits of the state-run insurance wind pool
Many coastal states have insurance pools for windstorm insurance claims. These wind pools have maximum home values associated with them.
For example, if a broker attains insurance for a client’s $1 million home through a wind pool that has a $750,000 home value maximum, then Excess Wind insurance will need to be gained through the surplus lines market to cover the additional $250,000.
Each wind pool is different, so it is important for brokers to learn the specifics for the states they service. In addition, wind pools may not cover replacement costs for contents. Brokers should work with their trusted surplus lines coastal expert to help make a client’s policy whole.
4. Do not allow clients to wait
If a client decides to wait on securing coverage, and The National Weather Service declares a tropical system a Named Hurricane, it is already too late. In Florida, for example, once a hurricane is named and begins to approach the coastline, a cease bind will be issued for a portion of the state or possibly the entire state, making coverage unattainable. Other areas have similar rules.
“When a storm is declared a threat to Florida, a cease bind prevents carriers and wholesalers from initiating new policies covering property, even for new home purchases,” said Ruppel. “However, underwriters are still able to write renewals during periods of cease bind, so long as not to alter coverage or deductible limits.”
During hurricane season, quotes may be left open for a shortened period of time as well. Clients will have to make a quick decision. If they wait, clients may not get the best terms. Whether clients forget or they are just trying to save money, it is important to educate them that when they wait the cost increases.
“Brokers and agents should recommend that clients take the time upfront to make sure they are properly covered,” said Heaner. “If a new homeowner waits too long, the mortgage company will force them to get wind coverage that only benefits the investor, as Wind insurance is required on all properties that have a mortgage taken out on them.”
5. Exceed their needs
Providing knowledge from outside of the insurance realm to clients – especially if they are new to the area – not only better prepares them, but also helps deepen relationships.
“Remind your clients that they should not wait until the day of the hurricane to buy extra food and water, and suggest they invest in a generator to keep key household items like the refrigerator working in event of an electrical outage, “said Dodd. “It is also a good idea to photograph or record video of home contents, in the event they are damaged beyond repair or potentially destroyed.”
Dodd added, “The broker needs to have updated contact information in the event of an emergency, as well as providing the client with the carrier claims number.”
If the client has a boat, they should move it to a secure location. Note that they would need a separate Recreational Marine policy – as damage to the vessel would not be covered under Wind and Excess Wind policies. Also, if the dwelling has storm shutters and/or impact-resistant glass, the risk can qualify for premium credits.
“Additionally, brokers and agents should inquire when an insured last replaced the roof in its entirety,” said Ruppel. “Conversations of what wind mitigation features are included on the home, can help save the client premium dollars as well. These features are verified by way of a Wind Mitigation Inspection.”
Educating clients and being their go-to resource is always a goal of brokers and agents. During hurricane season, the preceding five tips can be used to have meaningful and informative conversations with clients in coastal states. With the devastating impact that hurricanes have the ability to unleash, it is important to make sure all bases are properly covered.