You just saw a coastal home listed for sale. It has a beautiful view, and you can smell the salt air from the front porch. You’re dreaming of the rental income that will roll in, while picturing weeks for yourself relaxing in the sand and sun. You just can’t figure out why it’s been on the market for four months. Then you look into the cost of insurance, and your bubble bursts.
A little research could show you would have to pay a whole lot more that you thought to insure your little piece of paradise. It would be even higher if it was directly on the beach. Increasing risk from hurricanes translates into higher rates anywhere near the ocean. That dream house needs Flood insurance, Wind and Hail insurance and a standard policy to cover everything else.
So what can you do? Buy it anyway? Raise the rents? Or maybe find a way to save money on that coastal insurance. There is no magic bullet but there are a few things you can look at to keep the costs down.
The biggest opportunity to save money is with your Flood insurance. The Flood insurance alone could be as high as 70% of your insurance cost if water is near. The best way to save on this is to get an elevation certificate for your property. An elevation certificate shows the insuring entity how high your house is in relation to sea level. In general, the higher the house, the lower the flood risk, which lowers the Flood insurance premium. Elevation certificates are completed by survey companies and usually cost around $700.00. Sometimes you can save on this by asking the seller if they have an elevation certificate they are willing to share. Without an elevation certificate your Flood insurance is generally based on the worst case elevation. This can change however, dependent on when the house was built and a few other factors.
Some people choose to go without Flood insurance, but this is not suggested. We have all seen the interviews post hurricane with people that had no Flood insurance and lost everything. Just because an area has not flooded does not mean it won’t flood in the future. In addition, if you have a mortgage on the property your bank may require you to carry Flood insurance.
Another thing to look at is higher deductibles on your insurance, which can lower premiums. Near the ocean you will generally have a named storm deductible and a separate “all others” deductible. Be careful to balance your ability to pay that deductible with the possible savings, should you have a claim.
Overall, every house is a different situation and this is meant to simply provide general information on what might save you some money if you are looking for insurance on a coastal home. The best thing to do is to find a licensed insurance agent you trust; an agent that will review your particular needs, the property to insure, and the options that are available. Then they can present the options to you, so you can make an informed decision on your needs.