Coastal Home Insurance Facts

Purchasing a property along the coastline is nearly every person’s dream.  Despite all the fantastic beach and water-related activities, there is a significant risk related to owning an oceanfront home.  Coastal living introduces an increased risk of damage to your home from hurricanes, flooding, coastal erosion, and wear and tear from harsh weather conditions.

Coastal home insurance is a type of insurance specifically designed to mitigate risks associated with properties located in coastal areas. We will explain coverage limitations, differences when compared to standard home insurance, deductibles, and the purchasing process and hopefully shed more light on its significance.

While understanding classic homeowner insurance is not always easy, coastal home insurance can get even more complex when it comes to coverage exceptions and deductibles.

Who needs coastal home insurance?

Vulnerability to natural disasters and proximity to bodies of water are key factors that determine the necessity for specialized home insurance coverage. Coastal home insurance is common in Alabama, Texas, Georgia, and California as these states are particularly susceptible to hurricanes, flooding, and other weather-related risks.

Coastal home insurance provides financial protection not only to the structure itself but also to personal belongings. Some policies may include coverage for additional living expenses in case of temporary displacement.

The difference between standard home insurance and coastal home insurance?

In general, traditional homeowners insurance excludes damages caused by hurricanes, which means coastal property owners will need to acquire additional policies for hurricane, wind, and flood events.

Insurance carriers will have different requirements for coastal homes, but frequently this additional coverage is required for homes that are located 3 miles or less from the coast.

Factors affecting coastal home insurance premiums include the location of the property, its proximity to the coastline, historical weather patterns and disaster frequency in the area, construction materials used for the house, and the presence of protective measures like hurricane shutters or reinforced roofing systems.

How to purchase

When it comes to coastal home insurance, finding affordable coverage can be challenging. Over the last several years, insurance carriers have stopped selling policies in high-risk areas to avoid large payouts. This practice prevents homeowners from purchasing adequate coverage in case of a natural disaster.  For those insurance companies providing coverage in high-risk areas the affordability or renewal of their policies may sometimes pose a difficulty.

For homeowners who cannot obtain private insurance coverage for their coastal home, additional coverage may be available through the state’s FAIR Plan or Beach and Windstorm Plan. These insurance programs are created specifically for coastal homeowners who cannot find a policy on the private insurance market.

It is not uncommon to have multiple insurance policies for a coastal home to provide an appropriate level of protection.

Deductible for coastal home insurance

Home insurance deductibles are simply your out-of-pocket expenses before your insurance coverage starts. Homes in coastal areas will most likely include separate deductibles for windstorms, hurricanes and named storm deductibles (this applies to insurance purchased after the storm has been named by the NWS). These special deductibles are typically set at 1% to 10% of your property coverage limit, but this can vary by state and the property location.

Keep in mind, that a deductible will be most likely calculated per storm, so each consecutive one will require a new deductible amount.

Higher deductibles help insurers manage the financial risks associated with insuring properties in high-risk areas.

Are you obligated to have coastal home insurance?

Your mortgage provider may require you to purchase this additional coverage. If your house is paid for, this insurance is not required, but it certainly provides peace of mind.

If you are new to owning a coastal home, review your current policy and talk to a local insurance agency about any additional coverage that may be recommended in your area. Coastal homes aren’t all located in storm and flood areas so doing your research is probably the best first step.