Hurricane Season Is Just Around the Corner
Are you Prepared?
By Shawn Woedl
AccuWeather recently released its 2023 Atlantic hurricane season forecast, and although predictions point towards a less active season, it will still bring certain dangers and the potential for property loss. Tropical weather forecasters at AccuWeather are projecting 11-15 named storms, with four to eight expected to reach hurricane strength. The Atlantic hurricane season begins June 1, so now is the time to prepare your properties and tenants in hurricane-prone areas.
Catastrophic Losses Have Affected the Property Market
The extreme weather events of 2022, Hurricanes Ian and Nicole especially, caused a significant shift in the insurance market. Many carriers in Florida have suspended writing new business to assess their financial situations and ability to stay afloat. Unfortunately, this also means that substantial rate increases are imminent as carriers attempt to keep pace with costly insurance losses.
Although Hurricane Ian missed Louisiana, carriers are still feeling the impact of the 2020 and 2021 hurricanes. Properties in Louisiana have a high chance of incurring costly losses, making it difficult for carriers to maintain a healthy book of business. Many insurers have already canceled existing policies or announced they will not be renewed.
Other parts of the country are also seeing changes in property insurance. Rates and losses are being evaluated across the board due to the increased severity of inclement weather. Stricter underwriting guidelines and higher standard deductibles will make it difficult to find coverage in states like Alabama, Florida, Louisiana, Mississippi, and Texas.
Hurricane Mitigation Tips
Natural disasters don’t wait on humans to be ready to respond. Preparing your properties and tenants well in advance of a hurricane risk can help save thousands of dollars and maybe even a life.
Prepare your property
» Trim trees and shrubs well in advance of a storm so they can withstand higher winds.
» Secure loose gutters and clear debris to prevent water damage.
» Reinforce security of the roof, windows, and doors. Brace garage doors.
» Move exterior furniture, yard ornaments, or play equipment indoors.
» Cover all windows — permanent storm shutters are best, or board windows with 5/8” marine plywood. Tape does not prevent windows from breaking.
» Ensure that the sump pump’s backup battery is working.
» Purchase a portable generator for use during outages. Store it outside, away from windows and doors, and protected from moisture. NEVER try to power the house wiring by plugging a generator into a wall outlet.
Prepare your tenants
Advise tenants to stay alert for updated emergency information and follow shelter-in-place guidelines:
» Close and lock all windows, doors, and storm shutters.
» If flood waters rise to dangerous levels, go to the highest level of the building, and call 911. Do not climb into a closed attic; individuals may become trapped.
» In case of high winds, go to a small, interior, windowless room on the lowest level.
» Have adequate supplies in an emergency go-bag; several days’ worth of water, non-perishable foods, medication, and pet supplies.
» Follow instructions from local authorities.
» If advised to evacuate, do so immediately. Do not drive around barricades. Do not walk, swim, or drive through flood waters. Stay off bridges over fast-moving water. Do not go back to the affected area until local authorities advise it is safe to return.
The Differences Between Wind/Hail, Named Storm, and Flood Coverage
Hurricanes and other severe storms may involve many causes of loss simultaneously, which might not all be covered by the same insurance policy. The following coverages, though not exhaustive, may kick in at various points during the hurricane season.
Wind/Hail
Most standard policies for investment properties include wind/hail coverage. Although, in some states, it may be excluded and needs to be purchased as an endorsement. Wind/hail primarily covers damage caused by heavy winds, tornadoes, and hailstorms. These weather phenomena can be common in coastal locations and Midwest areas and may lead to roof damage, broken windows, or damage to detached structures like garages or sheds.
This cause of loss often carries a separate deductible from other perils, such as fire. This is typically a percentage of the insured value, which can differ based on the property’s distance to the coast. So, if your property deductible is $2,500 and you own a single-family insured to $200,000 with a 5% wind deductible, you are responsible for $10,000 before insurance payouts begin.
Named Storm
As soon as a storm is given a name by the National Weather Service, standard wind/hail coverage no longer applies. For damage caused by a named tropical storm or hurricane to be covered, your property policy must include Named Storm coverage. It is important to understand that damage caused by a rain or storm surge may or may not be covered depending on the situation.
If a windstorm or hurricane is determined to have created a “storm-caused opening,” such as lifted roof shingles or a broken window allowing rainwater to enter the home and causing damage within the property, damage may be covered.
However, if water enters the home due to a “storm surge” (an abnormal rise of water levels due to the presence of a storm) it would be considered a flood.
Flood
Flood coverage is almost always excluded from a property policy and must be purchased as a separate policy or endorsement to be covered. A flood occurs when two or more acres of dry land or two or more properties are overrun by water or mudflow. Flood coverage can be purchased through the National Flood Insurance Program (NFIP) offered by FEMA.
Private options that typically waive the waiting period associated with NFIP are also available. A Flood policy will also come with its own deductible.
Other Coverages to Consider
If you own properties in a hurricane-prone area, you must discuss exposure with your agent to ensure you are comfortable with the coverage you have. Below are a few additional coverages you may want to consider.
Other Structures
Detached structures, such as a shed or garage, need to be specifically included in your policies.
Loss of Rents
If damage from severe weather renders the property uninhabitable, Loss of Rents coverage can reimburse you for some or all your lost rental income while repairs are being made.
Keep in mind for Loss of Rents coverage to be triggered, the cause of loss must be included in your policy.
Renters Insurance
Your tenant’s personal property is not covered by any insurance you carry on the property. They will need to carry renters insurance to cover their belongings.
