THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, October 12, 1996 TAG: 9610100252
SECTION: REAL ESTATE WEEKLY PAGE: 06 EDITION: FINAL
COLUMN: ABOUT THE OUTER BANKS
SOURCE: Chris Kidder
LENGTH: 128 lines
Hurricanes and tropical storms have been flirting with the Outer Banks. Bob, Felix, Bertha, Fran: the list grows longer each year with the names of storms that could have devastated property on our barrier islands, but didn't. One of these times nature is going to give in and lay a good one on us. And when that happens, you'd better have your property insurance premiums paid up.
For many coastal homeowners, being properly insured against storm hazards means carrying three separate policies.
For primary residences and second homes not rented out, homeowners carry a standard policy purchased through companies like State Farm, Allstate, Nationwide and several other insurers who still write insurance for coastal properties.
Most companies have eliminated coverage for wind damage in beach areas, although a few still insure against wind in more sheltered areas (on Roanoke Island, for example). Homeowners whose companies exclude wind damage can purchase coverage through the state's Beach Plan.
Beach Plan wind storm insurance for the average beach house (elevated, more than 1,000 feet from water in flood zone A, $125,000 insured value for structure, $25,000 for contents) costs $629 in addition to the annual homeowners premium of about $300.
Owners of rental cottages can purchase replacement cost coverage for fire, lightning, wind, hail and all the other standard hazards except burglary through a Beach Plan package called the DP2- Broad Form. The annual premium for the house described above will be about $1,000 a year; a $10,000 burglary policy covering the cost of damage and theft will cost $120.
No homeowners policy written on Outer Banks property provides flood insurance as part of its coverage. Flood insurance is only available through the National Flood Insurance Program, administered by the Federal Emergency Management Agency (but issued through local insurance agents), or, in some cases, through Lloyds of London and other private insurers who specialize in high risk markets and supplemental policies.
NFIP coverage for the house described above runs about $233 per year and considerably less for homes in a C or X zone. Property owners in unincorporated Dare County recently were given a 10 percent discount on NFIP rates because of the county's flood hazard mitigation activities.
Almost any house in Dare or Currituck counties built in compliance with local building code standards is eligible for NFIP coverage.
But while most Outer Banks homeowners can get NFIP coverage, the coverage isn't enough for many new homes. NFIP limits coverage to $250,000 for residential buildings and $100,000 for contents. Homeowners needing additional insurance will also need to purchase privately underwritten policies.
Excess coverage (the difference between policy limits and actual value) is available through Lloyds of London.
Exceptions are houses built after Oct. 1, 1983, in areas set aside by the Coastal Barrier Resources Act of 1982 and the Coastal Barrier Improvement Act of 1991. On the Outer Banks, CBRA areas include land north of the Villages at Ocean Hill, north of Corolla, and a few soundside properties on Hatteras Island.
Homes built in these areas, if in compliance with coastal building codes, can be covered through privately underwritten flood policies up to NFIP limits. Currently, there are no companies offering excess coverage for CRBA properties.
Privately underwritten policies for our hypothetical beach house in a CRBA zone ranges from $1,260 to $2,050 depending on the deductible.
That's the good news about coastal hazard insurance: For most homeowners, it's available. For now.
Insurance companies pulled out of coastal states, including North Carolina, after Hurricane Andrew hit Florida. It's too early to tell what effect a storm like Fran will have on North Carolina's coastal insurance, says Robert Wells, CEO of Southern Insurance Agency, Kitty Hawk. ``If you have a homeowner's policy, don't let it lapse.''
``We're already seeing a tightening of the market for excess flood coverage,'' he says. ``There's no guarantee that market will always be there.''
But as long as flood insurance is available, the bad news for coastal homeowners continues to be that they often don't have the coverage they think they have.
Insurance agents on the Outer Banks say that many NFIP policies have been sold to homeowners in restricted areas, especially when policies are written by agents out of the area who may not be familiar with coastal North Carolina. In cases of loss, premiums paid for policies on ineligible properties will be refunded; claims will not be paid.
Most homeowners buy NFIP policies because their lenders require them. But lenders only require that the value of the structure at the time the mortgage is written be covered; homeowners pass over options for replacement value and neglect to add coverage for contents.
Making certain that policies will cover the current replacement value is important in an area like the Outer Banks where the price of a house can double in 10 years, says Wells.
With NFIP policies, only primary residences or second homes can be insured for replacement cost; rental cottages will be covered only for their depreciated value.
After Hurricane Fran hit North Carolina last month, many homeowners learned the details of their flood insurance policies the hard way. In flood zones, most contents stored in ground-level garages and storage areas of elevated structures - or living areas built under elevated structures in violation of coastal building codes - won't be covered.
Perhaps the worst news of all about flood insurance is that many people who need it don't have it.
Many homeowners don't buy flood insurance because they mistakenly believe that in cases of catastrophic flood the federal government will provide ``free'' disaster relief. It ain't necessarily so. Typically, federal disaster grants are under $2,500; additional aid is in the form of loans which must be paid back with interest.
If you live anywhere in Dare or Currituck counties, you probably need flood insurance whether your house is in a high-risk flood zone or not. According to Nags Head insurance agent J. Fletcher Willey Jr., statistics show that residents in floodplains are 27 times more likely to experience flood than fire over a 30-year period.
When Hurricane Hugo hit South Carolina in 1989, hundreds of homes were destroyed and thousands were damaged by flood waters more than 50 miles from the coast. Hurricane Fran, a less powerful storm than Hugo, caused severe flooding not only along the coast but in Raleigh and dozens of other inland cities.
If either of these storms had hit the Outer Banks directly, flood insurance would have more than paid for itself.
You might say all insurance is a gamble. But here on the Outer Banks, where hurricanes and northeasters are frequently within striking range, flood insurance may be as close to a safe bet as homeowners will ever get. MEMO: Send comments and questions to Chris Kidder at P.O. Box 10, Nags
Head, N.C. 27959. Or e-mail her at realkidd(AT)aol.com ILLUSTRATION: File photo by DREW WILSON
Storms can wreak havoc on the Outer Banks. Insurance is essential
for homeowners. by CNB