There are definite upsides to living in North Carolina, our famous beaches, vibrant cities, world-class restaurants and numerous cultural activities make our state a great place to call home.
However, one of the advantages of living here can be a double-edged sword. While many of our cities, Raleigh, Fayetteville or Charlotte are just a few examples, enjoy very affordable homeowners insurance, our coastal town residents often pay much more than the national average for coverage.
The average premium for a HO-3 policy in North Carolina, which is the standard homeowners insurance policy, comes in at $1,008, which is slightly lower than the national average of $1034.
Unfortunately, If you live in a coastal area such as Wilmington, Wrightsville Beach, Southport, New Hanover County or Brunswick County, all of which are considered high-risk, you will be paying much for homeowners insurance in North Carolina than your inland neighbors.
Here is a quick look at what you need to know about coastal insurance in North Carolina.
High Risk Areas
When it comes to high-risk areas in North Carolina the name of the game is coastal property. Homes located on the North Carolina coast are frequent victims of wind, flooding and hailstorm damage, not to mention hurricanes, which can cause tremendous damage in a very short period of time.
Hurricane Sandy was responsible for $57 million in insurance claims in North Carolina alone and five of the top 10 costliest hurricanes that hit the coast of the United States did some type of damage in North Carolina.
Due to skyrocketing claim costs, many insurance companies have excluded wind and hail damage from their standard homeowners policies in certain areas of North Carolina.
It should be noted that these exclusions only apply in certain coastal areas so if you live far from the coast your standard homeowners policy should cover wind and hail damage but it is always a good idea to check your policy for details.
On the other hand, if you live in a coastal area there’s a good chance you will need an additional policy to cover wind and hail damage. Check your insurance policy and contact your insurance agent with questions regarding this type of coverage as you do not want to find out you are not covered after a major storm.
While private insurers are moving back into the market, making it easier to find an affordable policy, that is not always the case. Unfortunately, in some coastal areas it can be difficult to find a wind and hail policy in the private market, which may require you to shop for a policy with the FAIR Plan or the Coastal Property Insurance Pool, which was formerly known as the Beach Plan.
What a Wind and Hail Policy Covers
If your standard homeowners policy does not cover wind and hail damage you will need to purchase a windstorm rider or separate windstorm policy.
Windstorm insurance is designed to cover damages caused by high winds. It will usually cover damages from hurricane force winds, hail, tornadoes and any other weather events that includes wind gusts over 35 miles per hour.
Windstorm insurance will typically cover damage to your home and personal belongings inside your house that are damaged by wind or hail. The majority of policies will also cover detached structures such as garages, swimming pools and even sheds.
In most cases windstorm insurance will not cover damage caused by flooding or storm surges. In this case you would need a separate flood insurance policy to be fully protected
Windstorm policies may be available in the private market and in most cases if you can find a private market policy it will cost less than a North Carolina high-risk pool plan. If you are unable to find a private market policy your only option will be one of the state run high-risk pools.
The Fair Plan
North Carolina has two different types of high-risk homeowners insurance pools and where you live will determine which one you will end up using if you cannot find coverage in the private market.
Both plans are risk pool arrangements which means that all insurance companies in the state that sell homeowners policies must share the risk of insuring of coastal property owners who are unable to find coverage in the private market.
These high-risk pool policies are available to anyone in North Carolina and can be written for a home, business or rental property. These policies typically protect against wind, hail and fire.
Coastal areas such as Morehead City, Nags Head and Maneo are covered by the Coastal Property Insurance Pool, which is managed by the North Carolina Insurance Underwriting Association (NCIUA). This plan deals mainly with costal properties that are extremely difficult to insure the private market.
There are limitations to these plans and if private insurance is available in your location, you should purchase coverage in the private market.
Here are a few limitations of the North Carolina high-risk pools:
- Costs: These policies tend to be more expensive than private market policies. Rates will vary but expect to pay 10 to 20 percent more for a high-risk pool policy.
- Actual Cash Value: All of your contents will be covered at actual cash value which means depreciation will be taken into account when valuing your possessions. This can leave you on the hook for major expenses when replacing your property.
- Coverage Limits: High-risk pool policies do have coverage limits. Both the FAIR plan and the Coastal Property Insurance Pool put residential limits of $750,000 on their policies and personal property is capped at 40% of the building coverage.
- County Limits: The Coastal Property Insurance Pool requires that your property be located in one of the following counties: Beaufort, Brunswick, Camden, Carteret, Chowan, Craven, Currituck, Dare, Hyde, Jones, New Hanover, Onslow, Pamlico, Pasquotank, Pender, Perquimans, Tyrrell and
Beware the Deductible
When it comes to the deductible on coastal insurance policies you must be aware that it is often different than a standard deductible. This special deductible often applies to private market insurance policies as well as high-risk pool policies.
In most cases there will be two separate deductibles. One deductible will be a standard fixed amount ($1,000 deductible for example) and will apply to damages such as fire, vandalism or burglary while the second deductible will only apply to wind and hail damage.
The wind and hail deductible is often a percentage deductible which means you will have to cover a certain percentage of the policy amount before your insurance covers the balance.
As an example, if you have $300,000 in home insurance and the wind and hail deductible on the policy is 1% you would have to pay $3,000 out-of-pocket for a wind or hail related claim before your insurance policy would cover the balance.
If you are purchasing a wind and hail policy in the private market verify what type of deductible applies to wind and hail damage so there are no surprises if you need to make a claim. As with all insurance policies read the policy in full and ask questions about anything you do not understand.
Helpful Article: Home Insurance Deductible Savings Vary by State
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