Rental Property Investor · Delray Beach, FL · Member since 2014 · 224 posts · 169 votes
I'm curious if other rental owners do or do not pay for hurricane coverage on their insurance policy? I have a house I just bought in Florida that I had quoted for insurance today. To add hurricane insurance would literally more than double my premium. How do other owners feel about this?
I'm sure you already know this, but I always like to remind. Named Storm Coverage on a property insurance policy does NOT cover flooding, in the event of a storm. Flood insurance, ie flooding from the street/land, is a totally separate policy.
For example, I'm here in New Orleans. New Orleans had some damage from Hurricane Katrina, strictly speaking about just the "hurricane" part. But the VAST majority of the damage? That wasn't from hurricane-force winds. That was from the flooding that happened afterwards. A rude awakening for people who had adequate coverage for the value of their home on property insurance, but either didn't have or didn't have adequate coverage on their flood insurance.
Coastal or central? Who did you have quote it?
My suggestion. Call Eric Shaw at www.shawinsures.com. He’s great for FL risks.
Personally I’d never go without coverage for the largest risk you face.
@Derek Lacy How do other investors handle this? The cost of hurricane insurance as I have been quoted almost makes owning these homes total non-starters. Surely there must be a way to have some sort of coverage without destroying my margins.
My 2 cents. If the deal doesn’t have enough room for proper risk mitigation then it’s not a good deal.
I see this mistake often from starting investors. They focus on insurance costs and not total cost of risk, of which insurance costs are only one part.
How much will it kill your margin to have the roof ripped off and water damage throughout?
Don’t like hurricane risk? You can always invest in Phoenix, insurance costs are negligible there.
I mean I guess you're right, but the added cost of the hurricane insurance is such that if a hurricane DOESN'T rip my roof off within 5 years, then I've already paid the insurance company enough for a new roof just on the difference alone (the hurricane coverage was quoted to me at an extra $130/month, which is $7800 in 5 years. I literally just put a brand new roof on the same house for $6500).
I guess I'll reach out to some other investor friends I have directly about what they're doing because surely there is some sort of happy medium here. Thanks for the information.
I just wanted to provide some info that may be helpful. I invest in West Volusia County, DeLand area, and while Volusia is a coastal county, I do not find the insurance premium w/ hurricane coverage to be excessive. As an example, on one of my SFR investment properties, the total annual premium with an insured value of $204,000 is $1,054.00 per year. I have a 2% deductible for hurricane, and $2500 deductible for all other losses. Hurricane portion of premium is $428/year and non-hurricane portion is $519, balance is liability premium ($300K coverage). All of my properties are in line with this, varying in a range of $1000 to $1500 per year total per property depending on property specifics. I always have a wind-mitigation done for $95, which has saved me money on every property to date. Even homes built in the 1950s or 1960s will receive some wind-mit credit. Things such as real lumber roof deck, which all homes built before 1970 have, should save you money on insurance.
I had insurance pay for two new roofs on properties due to the hurricane last fall, so I felt it was money well spent.
Get hurricane insurance. Just treat it as a cost of doing business. If the deal doesn’t support the cost, it isn’t a deal. Having gone through Katrina, and now Michael (2 of the three most powerful on record) I can tell you that hurricanes are like a 100 mile wide tornado, and don’t care about ten miles inland.
I'm sure you already know this, but I always like to remind. Named Storm Coverage on a property insurance policy does NOT cover flooding, in the event of a storm. Flood insurance, ie flooding from the street/land, is a totally separate policy.
For example, I'm here in New Orleans. New Orleans had some damage from Hurricane Katrina, strictly speaking about just the "hurricane" part. But the VAST majority of the damage? That wasn't from hurricane-force winds. That was from the flooding that happened afterwards. A rude awakening for people who had adequate coverage for the value of their home on property insurance, but either didn't have or didn't have adequate coverage on their flood insurance.
I have properties in Southeast Louisiana. Each have a flood policy (around $700/year) and each have a dwelling policy that include wind and hail. The big deal with wind and hail (which includes hurricane) is that the deductible is much higher (like 2% or 3% of the value of the property).