Question:

Have we begun to see any changes in insurance coverage and or premiums resulting from our recent summer hurricanes?

Answer:

In a previous article we began to address this question under the guise of "What impact has (will) the storms have on financing on beach front or water front properties?" This appeared in the Pensacola Association of REALTORS magazine November 1995. In that article the information shared basically indicated that on waterfront and beach front properties there were no changes in the financing that was available as of that date, but it could be expected that we would see some changes from the insurance industries standpoint regarding the types and amounts of insurance lenders would require on the types and amounts of insurance lenders would require on these types on properties in the future. It was indicated it may be well into spring before it was known what their impact would be.

The question at hand now does not address just waterfront properties. Yet this is specifically where we have begun to see some changes. These will be discussed in a moment. First, with regard to properties which are not waterfront, there are two items which have come to our attention. First, like many private companies have done previously, the state is attempting to reduce its exposure as an insurer. According to news reports the state created JUA is the number three insurer of property behind Allstate and State Farm. there are discussions of raising premiums for this type of insurance in order to make it an insurance pool of last resort. Obviously, this in turn leaves room for private companies to raise premiums as well.

The other area of insurance impact is that of flood insurance. First lenders are now required to monitor flood maps for the life of the loan and force place flood insurance if necessary. (Thus the need for flood certifications on real estate transactions.) Flood maps have and will continue to be changed causing some properties which were not previously in flood zones to now be in one. Thus flood insurance may now be required where it was not previously. As of this writing, a closing is impacted by this very situation. the listing agent in the MLS indicated no flood insurance was on the property leading the buyer to believe it is not required. The new survey, completed by the same survey company which had done the survey previously, now shows the property in a flood zone A. Flood insurance which was unexpected is $743.00 on this property.

The issue of flood insurance particularly effects the waterfront and beach front condominiums. Many owners who were not insured, or under insured, with regard to flood insurance are now in a position of having to fight insurers as to what damage and dollar value was flood related vs. wind storm related. this has caused lenders to pay particular attention to the coverage associated with these properties. Also, it has caused some lenders to require coverage beyond what may have been acceptable in the past. for example on condominiums, it can be expected owners that need a mortgage loan will be required to have a policy separate from the Associations which would cover the interior of the unit. Also, flood insurance may be required even if the project is a high rise and the unit is above the first or second floor. The concern here, be it far fetched or not, is if a tidal surge destroys the structural integrity of the high rise, a unit on the ninth floor may be fine, but due to the flood related problem, the building may need to be torn down and rebuilt. Few Association policies contemplate damage to this magnitude as a result of a flood insurance related claim. Thus a lender may wish flood insurance separate from the association policy on a ninth floor unit.

The upside to all of this is, now that we have been seen the potential for damage, the cost for this protection is minimal and to an owner's benefit. Required or not, most owners would be foolish not to seek appropriate coverage.

This information is provided by Access Mortgage Corporation 904-932-1100.