By: Bill Hannan and Dermot Dolan Hamptons Risk Management Insurance Brokerage
We are often asked questions by people we meet, “Bill, what will my insurance carrier pay if another hurricane hits our community?”
The response generally begins with, “that depends…”
It depends upon everyone’s individual policy. Each homeowner is unique because each home is different, and has a different value. Each policy has a different framework, not only dependent on the value of the home, but the carrier and the clauses within each policy.
Most people are concerned about such “complexity.” We do know that home owner policies are not like a “stick of butter.” Different policies offer varying levels of coverage. Yes, they can be complex, but perhaps not quite as complex if a broker takes the time to look it over and explain the basic elements of coverage. In essence the payout will depend upon the quality of coverage.
We on Long Island are nearing to 10th anniversary of Hurricane Sandy. In fact, it was NOT a hurricane, but a tropical storm. “Hurricanes”, as defined legally, have sustained winds in excess of 75 miles an hour certified by the national weather service. So when Sandy hit, it was a tropical storm. This meant that instead of the hurricane deductible being in effect in home insurance policies, some other covenant came into place.
On Long Island building codes are such that most homes have solid construction protection from high winds. In fact, most homes in Manhasset are brick, or “masonry” construction. This makes them sturdier during storms, and more appealing for insurance carriers to cover them. So despite living on long island which scares away some carriers, other carries take a closer look at communities like Manhasset, and are willing to write sensibly prices protection policies because they know home constructed by brick tend to hold up during storms, and tend to burn down not as fast as wood construction. This is a benefit to living in Manhasset.
Most residents of Manhasset are consumers of insurance. There are three essential questions all consumers of insurance in Manhasset should consider are the evaluate the insurance path.
Q. Does your policy pay out an “Unlimited Replacement Cost,” allowing you to rebuild your home if the cost exceeds the dollar coverage amount on your policy?
A. Many carriers offer a “Replacement Cost” policy, up to a dollar amount. They may add a clause that states they will replace, up to 125 percent of that cost. In either case, these are limited policies. Other, more attractive policies to the consumer are “unlimited” or “guaranteed replacement cost.” Carries that offer such policies will re-build your home no matter what the cost. This offers the consumer greater protection. This type policy tends to be more attractive.
Q. Does your policy fully pay out its stated limits if you choose not to re-build your home and prefer the option to “walk away?”
A. Many, if not most, carriers do not allow you to “cash out” after such a storm. Instead they force you to withstand the cumbersome process of a rebuild to fully collect your insurance. Today, some dynamic carriers do offer the “cash out” option. The additional option may prove attractive to some customers.
Q. Does your policy include the unlimited cost of renting a similar home in the event of a fire?
A. Many carriers no longer pay an unlimited amount. Instead they “cap”, or state a pre-determined amount. This pre-determined amount may not be enough to cover renting a home in a community like Manhasset. There are some highly reputable carriers who do offer unlimited amount for a “reasonable time period necessary” to re-build your home.
A solid homeowner’s policy in a town like Manhasset should include these important features. Such covenants may prove invaluable should an unfortunate event come to pass. While homeowner’s insurance is not inexpensive, the difference between a sound policy, and one which does not contain some or the aforementioned items, are an important consideration. Contact your trusted personal insurance broker to discuss these issues.