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Personal Lines Realtor Insight Addressing Hurricane Season Insurance ConcernsHurricane Season can be a time of turmoil for property owners and real estate professionals alike. The short-term effects of a hurricane can occur both before and after a storm.

Before a Hurricane
Between June 1st and November 30th, Florida enters Hurricane Season, and real estate professionals should be aware of possible restrictions regarding securing insurance for a home purchase. If there is a named storm (typically a Tropical Storm, Hurricane Watch, or Warning) that develops and is threatening our area, most insurers will temporarily close for new policies until the threat passes.  In other words, a buyer won’t be able to obtain insurance. This has the potential to impact a home’s closing. If the buyer is financing the home purchase, their lender typically won’t grant a loan commitment without homeowner’s insurance. To prevent this, it is critical to advise buyers to look into securing their insurance as soon as possible, and before the closing date. Buyers should contact their insurance agent and purchase a policy as early as possible during Hurricane Season.

In addition, standard homeowners’ policies typically exclude the peril of flood. All properties are located in a flood zone.  Realtors should advise buyers to seek guidance from a local insurance advisor to perform a flood zone determination and confirm if the property is located within a Special Flood Hazard Area.  Recently, there have been numerous legislative and rate changes for flood policies by the National Flood Insurance Program (NFIP). Most recently, FEMA has updated the NFIP’s pricing methodology to communicate flood risk more clearly so policyholders can make more informed decisions on the purchase of adequate insurance and on mitigation actions to protect against the perils of flooding. The 21st century rating system, Risk Rating 2.0—Equity in Action, provides actuarially sound rates that are equitable and easy to understand. It transforms a pricing methodology that has not been updated in 50 years by leveraging improved technology and FEMA’s enhanced understanding of flood risk. FEMA is taking a phased approach to rolling out the new rates:

  • Phase I: New policies beginning Oct. 1, 2021 will be subject to the new rating methodology. Also beginning Oct. 1, existing policyholders eligible for renewal will be able to take advantage of immediate decreases in their premiums.
  • Phase II: All remaining policies renewing on or after April 1, 2022 will be subject to the new rating methodology.

 

Even policy information from the seller for the property may not always be reliable due to flood zone changes and rating errors. It is best to consult an experienced Florida insurance professional at the very start of the due diligence process with any property, to get an accurate flood insurance quote and explanation of flood zones.

After a Hurricane
Insurance carriers carefully review properties for prior losses and open claims and will inspect homes after a new policy is placed, as well as, spot-check the home over the life of the policy. In most cases, homes with existing damage are uninsurable if repairs are not made prior to the home closing or in a timely manner following the closing. All insurance carriers will require photos of the affected damaged areas, contractor receipts, and any applicable permits to show that the repairs have been completed.  It is not uncommon for insurance carriers to cancel coverage if issues are discovered that were not disclosed on the application. It is important to understand that overall, it is very challenging to bind a new policy for a home that has an open hurricane claim.

Following a catastrophic hurricane or other natural disaster, insurance companies may struggle to keep up with higher-than-expected losses, and subsequently, homeowners may see increases in rates. Average home insurance rates have risen in every state in the last decade, mainly due to natural disasters, and Florida’s average rate is the highest in the nation. Florida tends to have most of its damage caused by hurricanes, such as Hurricane Irma, which hit the state in September 2017 and caused $11.1 billion worth of damage, with the vast majority of that to homes.

No area in the country, or arguably the world, has a stretch of coastline as expansive and hurricane-prone as Florida. This susceptibility to hurricanes puts homeowners and insurance companies in a risky situation. Real estate professionals should always advise homeowners to seek the advice of a local insurance agent on coverages needed. Just as insurance companies have different contracts by state, the contracts can also vary greatly within a state. A local agent will be able to help navigate through these differences and identify the bigger gaps in coverage/contracts.

Gulfshore Insurance is a Naples, Florida based insurance agency specializing in home and homeowners insurance, car and auto insurance, boat and yacht insurance, property insurance, umbrella insurance, valuables insurance for fine art, jewelry, wine, and more. Navigating insurance requires an experienced and trusted insurance agent who understands your high net worth risks and exposures. Gulfshore Insurance services Naples, North Naples, Port Royal, Park Shore, Pelican Bay, The Moorings, Naples Beach, Marco Island, Bonita Springs, Sanibel Island, Captiva, Fort Myers, Sarasota, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.

Commercial Lines Florida Legislature Passes Property Insurance Bill to Improve AffordabilityProperty insurance rates are on the rise with insurers reporting $1.6 billion in losses last year. And one of the biggest drivers of rate increases is the extraordinary number of roofing claims in Florida. Florida lawmakers are hoping legislation passed recently will help lessen the blow, but even with the proposed changes, rates may likely keep increasing in the short term.

The recently passed legislation clarifies insurance coverage related to roof damage and replacement; creates a uniform period for filing a claim; requires the insured to notify the insurer before filing a lawsuit; and changes how attorney fees are handled in litigation.

The bill allows insurers to offer homeowners policies that adjust roof claims to actual cash value if the roof is older than 10 years and allows property insurers to offer homeowners the option of purchasing a stated value limit for roof coverage. It also creates a uniform two-year period for filing a property claim, supplemental claim, or reopened claim, versus the current three-year statute of limitations in Florida.

Under the bill, insurers must be notified of claims in detail and given sufficient time to inspect properties before lawsuits are filed.

The bill also changes how insurers are obliged to cover insured’s attorney fees. Whereas currently insurers must pay a fee even if the insured only recovers a small amount, the new legislation means insurers’ obligations will be directly related to how successful the claim was and sets out a “strong presumption” that fee awards should be limited to a reasonable lodestar fee structure.

The legislation is now awaiting the governor’s signature, and we will continue to keep you updated. If you have any questions or concerns regarding this information, please contact us. We are here to assist you and happy to answer any questions you have.

Gulfshore Insurance is a Naples, Florida based insurance agency specializing in liability insurance, property insurance, workers compensation insurance, vehicle insurance, business income interruption insurance, cyber insurance, commercial umbrella insurance, home and homeowners insurance, car and auto insurance, boat and yacht insurance, property insurance, umbrella insurance, valuables insurance for fine art, jewelry, wine, and more. Navigating insurance requires an experienced and trusted insurance agent who understands your business risks and exposures. Gulfshore Insurance services Naples, North Naples, Marco Island, Bonita Springs, Fort Myers, Sarasota, Lido Beach, Longboat Key, Bradenton Beach, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.

Personal Lines FEMA Releases New Flood Insurance RatingFEMA is updating the National Flood Insurance Program’s pricing methodology to communicate flood risk more clearly, so policyholders can make more informed decisions on the purchase of adequate insurance and on mitigation actions to protect against the perils of flooding.

The 21st century rating system, Risk Rating 2.0—Equity in Action, provides actuarially sound rates that are equitable and easy to understand. It transforms a pricing methodology that has not been updated in 50 years by leveraging improved technology and FEMA’s enhanced understanding of flood risk.

“The new pricing methodology is the right thing to do. It mitigates risk, delivers equitable rates, and advances the Agency’s goal to reduce suffering after flooding disasters,” said David Maurstad, senior executive of FEMA’s National Flood Insurance Program. “Equity in Action is the generational change we need to spur action now in the face of changing climate conditions, build individual and community resilience, and deliver on the Biden Administration’s priority of providing equitable programs for all.”

The National Flood Insurance Program provides about $1.3 trillion in coverage for more than 5 million policyholders in 22,500 communities across the nation. Understanding the magnitude of even the smallest changes of a program of this scale, FEMA devoted thousands of hours to develop the new pricing methodology to ensure equity and accuracy.

In developing the new rates, FEMA coordinated with subject matter experts from the U.S. Army Corps of Engineers, U.S. Geological Survey, and the National Oceanic and Atmospheric Administration along with experts from across the insurance industry and actuarial science to ensure alignment with federal regulations, systems, guidance, and policies.

The new methodology allows FEMA to equitably distribute premiums across all policyholders based on the value of their home and the unique flood risk of their property. Currently, many policyholders with lower-value homes are paying more than they should and policyholders with higher-value homes are paying less than they should.

To provide more equity, FEMA now has the capability and tools to address rating disparities by incorporating more flood risk variables. These include flood frequency, multiple flood types—river overflow, storm surge, coastal erosion, and heavy rainfall—distance to a water source, and property characteristics such as elevation and the cost to rebuild.

The cost to rebuild is key to an equitable distribution of premiums across all policyholders because it is based on the value of their home and the unique flood risk of their property. This has been an industry standard for years.

FEMA is conscious of the far-reaching economic impacts COVID-19 has had on the nation and existing policyholders and is taking a phased approach to rolling out the new rates.

  • Phase I: New policies beginning Oct. 1, 2021 will be subject to the new rating methodology. Also beginning Oct. 1, existing policyholders eligible for renewal will be able to take advantage of immediate decreases in their premiums.
  • Phase II: All remaining policies renewing on or after April 1, 2022 will be subject to the new rating methodology.

 

FEMA continues to engage with Congress, its industry partners, and state, local, tribal and territorial agencies to ensure clear understanding of these changes. For the latest information on Risk Rating 2.0, visit fema.gov.

Ron Lazarto, CPRIA is a Client Advisor and Partner at Gulfshore Insurance specializing in Private Risk Services. Ron specializes in offering customized property and casualty insurance solutions for successful individuals and their families. Comments and questions are welcome at rlazarto@gulfshoreinsurance.com

Gulfshore Insurance is a Naples, Florida based insurance agency specializing in home and homeowners insurance, car and auto insurance, boat and yacht insurance, property insurance, umbrella insurance, valuables insurance for fine art, jewelry, wine, and more. Navigating insurance requires an experienced and trusted insurance agent who understands your high net worth risks and exposures. Gulfshore Insurance services Naples, North Naples, Port Royal, Park Shore, Pelican Bay, The Moorings, Naples Beach, Marco Island, Bonita Springs, Sanibel Island, Captiva, Fort Myers, Sarasota, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.

Personal Lines A Key to Wealth Preservation Umbrella Liability ProtectionIn today’s litigious environment, successful clients are growing increasingly concerned about becoming the target of a costly lawsuit, yet many remain ill-prepared for such an occurrence. Typically, insurance policies (e.g. homeowners, automobile, and watercraft) include initial limits of “primary” liability that respond to legal judgments. However, these are commonly limited to $300,000 or $500,000, making them inadequate in today’s litigious society where multi-million-dollar judgments are all too common. An Excess Liability or “Umbrella” policy kicks in when a lawsuit judgment exceeds the limit on homeowners and auto policies. We recommend clients consider the maximum net worth they are willing to risk should such a lawsuit occur. We can place up to $100,000,000 in personal umbrella, and our recommendation is to maintain Excess/Umbrella Liability protection at a minimum limit of $5,000,000.

Below are just a few examples of why coverage limits matter.

Type of Loss: Liability
Description: Worker handling renovations at insured’s home fell 12 feet from a ladder, suffering serious head and brain injuries.
Verdict/Settlement: $11,000,000 *Plaintiff alleged dangerous work conditions as contributing factor to fall.

Type of Loss: Liability
Description: A neighbor was leaving a neighbor’s yard and tripped and fell over tree roots protruding through the ground. The fall caused a fractured hip, necessitating surgery and the use of a walker for the rest of his life.
Verdict/Settlement: $2,100,000

Type of Loss: Liability
Description: Child injured in swimming pool accident; resulted in permanent paraplegia.
Verdict/Settlement: $13,000,000

Type of Loss: Auto
Description: While test driving a new car, driver lost control and crashed, killing the salesman who was the passenger in the vehicle.
Verdict/Settlement: $13,700,000 *Wrongful death lawsuit by salesman’s family.

Type of Loss: Watercraft
Description: Insured’s boat collided with another boat, killing a passenger in the other boat. The passenger was a co-owner of a successful business and high-income earner.
Verdict/Settlement: $6,500,000 *Insured’s $5,500,000 limit was inadequate and held personally responsible for $1,000,000.

There are two key components that should be included in a comprehensive Excess/Umbrella policy:

  1. Uninsured/Underinsured Motorist – This important protection is provided under most primary Automobile policies. It ensures that a household member will be covered for injuries he/she receives from a negligent driver. In the event of a qualifying accident, the insurance company will pay the difference between what the uninsured/underinsured driver can pay and what the injured driver would be entitled to as if the uninsured motorist had proper insurance in effect (coverage also applies in “hit-and-run” accidents). We encourage every client to purchase additional limits of protection, which are available as an endorsement to the Excess/Umbrella policy. This additional protection covers the bodily injury damages they cause you or a family member.
  2. Ensuring a Proper Defense – Most clients are unaware of how their defense would be managed by their insurance company in the event of a lawsuit brought against them or a family member. Three specific items to request include:
    • Outside the Limits – All covered defense costs are “outside” the limit of Excess/Umbrella coverage, thus preserving the full Excess/Umbrella coverage limit for judgments against you.
    • Expanded Defense – A sub-limit of coverage will apply to the reasonable expenses for your preferred law firm to review and consult on the defense offered by the policy.
    • Reputational Damage – Some policies will also provide a sub-limit to cover the fees of a public relations firm to protect your reputation within your community.

 

Remember, coverage needs evolve over time. It is critical to inform a trusted insurance advisor of any related exposures that you or your clients may have.

Andrea Pelletier, CPRIA, CPIA is Client Advisor and Partner at Gulfshore Insurance specializing in Private Risk Services. Andrea works with successful individuals and their families on creating and customizing package insurance solutions in the areas of luxury homes, car collections, jewelry, fine arts, watercraft, and personal excess liability. Comments and questions are welcome at apelletier@gulfshoreinsurance.com

Gulfshore Insurance is a Naples, Florida based insurance agency specializing in home and homeowners insurance, car and auto insurance, boat and yacht insurance, property insurance, umbrella insurance, valuables insurance for fine art, jewelry, wine, and more. Navigating insurance requires an experienced and trusted insurance agent who understands your high net worth risks and exposures. Gulfshore Insurance services Naples, North Naples, Port Royal, Park Shore, Pelican Bay, The Moorings, Naples Beach, Marco Island, Bonita Springs, Sanibel Island, Captiva, Fort Myers, Sarasota, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.

Personal Lines Second Home Risk Management StrategiesWhether it is a beach house, mountain getaway, or snowbird retreat, every second home has its own unique characteristics and usage patterns that need to be understood when designing an insurance policy and risk management plan.

There are four key areas that owners should understand when protecting their second homes:

  • Occupancy Status
  • Property Risk
  • Liability Risk
  • Risk Management

 

Second Home Occupancy Types


The occupancy type of a second home will depend greatly on the intended use of the property by the owner. There are several different uses for second homes, which are listed below along with the risks that are associated with their occupancy types.

  • Family vacation homes. Vacation homes are used solely by the family and friends of the owner of the home. These homes are generally occupied a small percentage of the year for vacations. When a vacation home is unoccupied, even a small loss can turn into a major problem because no one is there to identify it.
  • Investment property. Homes that are purchased as an investment are intended to be sold for a profit. Owners of these homes may spend considerable sums to renovate them prior to selling. These homes are generally unoccupied, under renovation, and for sale during the owner’s involvement with them, leaving them open to significant risks.
  • Long-term rental properties. Long-term rental properties are leased to tenants for months at a time. Leases are typically from 6 to 12 months in duration. When a homeowner rents a property to a tenant, they become a landlord to that tenant with a responsibility to maintain the home to ensure it is safe for the tenant. A dwelling fire policy is an appropriate policy for this type of home.
  • Shortterm rental properties. Short-term rental properties are rented to tenants for a minimum of one night but could be rented for a much longer time frame. The purpose of these properties is to yield a profit for the homeowner by renting the property as often as possible throughout the year. This arrangement is classified as a business, and the insurance policy needs to cover the commercial aspects of this type of property.
  • Homes under major renovation/construction. A second home might be an 1800s farmhouse in need of a major renovation or a custom home built from the ground up. The challenge with insuring these homes is the renovation or construction that will occur prior to the homeowner moving in. The major risks to these homes include active construction risks (e.g., power tools, demolition, etc.), it is an unoccupied home/structure during construction, it is an attractive nuisance for passersby that could lead to vandalism or a liability concern, building materials may be left unattended, etc. These situations need special attention with respect to the insurance program.

Property Damage Risk from Natural Disasters


Many people choose to purchase their second home in an exotic location: near the beach, in the mountains, near rivers and lakes, or in remote locations. In addition to the picturesque views these properties offer, they may also come with a high exposure to natural disaster or catastrophe risk. Oceanfront properties face the risk of flooding and wind damage caused by high winds and hurricanes every year. Homes located in arid climates are exposed to wildfire activity during periodic droughts, and properties near a fault line may be damaged when an earthquake strikes.

The important thing to understand when purchasing a second home that is exposed to natural disaster or catastrophe risk is that special insurance will need to be purchased to cover these risks. For example, a home near the beach may need a separate policy to cover wind and flood damage. A home located near a fault line may need a separate policy to cover earthquake damage. These coverages will add to the cost of the insurance plan but are critical to the home’s protection.

Liability Risk at Second Homes

Liability insurance provides important protection for homeowners. This protection will pay legal defense costs and damages awarded by lawsuits brought on by an injury or property damage caused by negligence. Second homes carry significant liability risks that could relate to swimming pools and spas, outdoor sports courts, and tenants or renters. Whatever the exposures are for a second home, they need to be considered in the policy design process to ensure proper coverage is in place.

Risk Management for Second Homes

Once a policy is designed, the final step is to incorporate intelligent risk management strategies and technologies to help predict, prevent, and mitigate potential future losses. Here is a quick overview of some of the strategies and technologies that are being used to protect second homes.

  • Hire a property management company to monitor and preserve the property.
  • Turn off the main shutoff valve for the water when the home is not in use.
  • Be wary of social media posts that indicate a property is unoccupied.
  • Ensure all doors and windows are closed and locked when the home is not in use.

Insuring secondary homes can be a complex process. It takes a clear understanding of the property characteristics and insurance company guidelines to deliver a well-crafted insurance program. Working with an insurance agent who specializes in insuring second homes is the best way to ensure the second home is properly protected.

Kevin Havemeier is an Associate Client Advisor at Gulfshore Insurance specializing in Private Risk Services. Kevin works with successful individuals and families with complex insurance needs. He analyzes his clients’ risks and collaborates with them to design customized solutions with the goal of ultimately delivering peace of mind. Comments and questions are welcome at khavemeier@gulfshoreinsurance.com

Gulfshore Insurance is a Naples, Florida based insurance agency specializing in home and homeowners insurance, car and auto insurance, boat and yacht insurance, property insurance, umbrella insurance, valuables insurance for fine art, jewelry, wine, and more. Navigating insurance requires an experienced and trusted insurance agent who understands your high net worth risks and exposures. Gulfshore Insurance services Naples, North Naples, Port Royal, Park Shore, Pelican Bay, The Moorings, Naples Beach, Marco Island, Bonita Springs, Sanibel Island, Captiva, Fort Myers, Sarasota, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.