Mauna Loa Eruption and Property Insurance

[Carlos Ptriawan]

Now that Mauna Loa has erupted, what's the property insurance company going to do if the lava hits a residential area like Hilo? Are they going to cover it 100% ? are they going to raise property insurance for the whole big island ?

What's your story on this as it happened before (like Kalapana in 2018) ? 

[Aaron Porter]

Most homeowner policies have coverage for property loss caused by volcanic eruption when it is the result of a volcanic blast, airborne shockwaves, ash, dust or lava flow. Fire or explosion resulting from volcanic eruption also is covered.  

But I am sure that there are some homes in or around Hilo that could have opted out of that coverage.  As for what is going to happen with rates across the whole island, I would say that is a total guessing game.  I literally just got back to the mainland a week ago and was able to go see some of the damage that was caused by the 2018 eruptions. 

I will be watching very closely as the big Island is one of my favorite places ever.  

There is an insurance agent on BP who lives in Hawaii, I can't remember his name but maybe he will have some more insight.

 

[Cole Schlack]

"Varies by policy and interpretation" is the only real answer.  Many carriers exclude coverage but it depends on how your home is destroyed and policy wording.  Hilo is in a lava zone 3 which is lower risk and does not require any additional review by mortgage or insurance companies.  The current flow is in the zone 2 which is much more likely, so if it stops there it wont change anything. If the lava flow makes it to lava zone 3 and causes a bunch of damage we could see rates for properties in the Zone 3 go way up.  It should not change rates for the other zones  on the island either way.

[Carlos Ptriawan]

Quote from @Cole Schlack:

"Varies by policy and interpretation" is the only real answer.  Many carriers exclude coverage but it depends on how your home is destroyed and policy wording.  Hilo is in a lava zone 3 which is lower risk and does not require any additional review by mortgage or insurance companies.  The current flow is in the zone 2 which is much more likely, so if it stops there it wont change anything. If the lava flow makes it to lava zone 3 and causes a bunch of damage we could see rates for properties in the Zone 3 go way up.  It should not change rates for the other zones  on the island either way.

 I see, so it may impact region that has the same lava flow zone status, although that area may not be impacted by the current eruption.

[Account Closed]

Quote from @Aaron Porter:

Most homeowner policies have coverage for property loss caused by volcanic eruption when it is the result of a volcanic blast, airborne shockwaves, ash, dust or lava flow. Fire or explosion resulting from volcanic eruption also is covered.  

But I am sure that there are some homes in or around Hilo that could have opted out of that coverage.  As for what is going to happen with rates across the whole island, I would say that is a total guessing game.  I literally just got back to the mainland a week ago and was able to go see some of the damage that was caused by the 2018 eruptions. 

I will be watching very closely as the big Island is one of my favorite places ever.  

There is an insurance agent on BP who lives in Hawaii, I can't remember his name but maybe he will have some more insight.

 

 Thank you for sharing your thoughts here. I'm just getting started learning about investing in Hawaii and this is some crucial information to consider. I will most definitely not be cutting corners on insurance with my properties. I hope you're having a great day and that you as well as all of yours are safe. 

[Account Closed]

Thank you Carlos for putting this up! I am really grateful as I'm just getting started learning all I can about investing in Hawaii. Specifically someone told me to learn about lava zones so I am absorbing all I can from this post. 

I hope you get some really helpful information and look forward to talking with you Sir! 

[Carlos Ptriawan]

My particular experience related to Big Island investments ( since the beginning my requirement is very specific, it has to be tidepool-front; small condo, Fee Simple, Airbnb-approved by county, HOA fee is manageable) , related to property insurance :

- The HOA already has a wide coverage of property insurance, so I only have to buy insurance that covers the loan part only,
but I have to communicate this several times to the lender for them to agree upon. I also have to use a non-QM lender.

- Condo owner doesn't need to buy hurricane insurance and flood insurance, at least in my complex. Homeowners definitely need to have one. 

- Reading the history of beachfront HOA and CCR, I realized homeownership is not a good choice for me as the maintenance is just too huge.
They have a project/assessment building for the seawall, I can't handle that if I'm a homeowner.

- Every insurance broker is also giving different information and different quote, for example, the rate for insurance using LLC is very different
than using the owner's name as insured, but that doesn't make sense. Then I found another insurance co.
that could give a better rate and be accepted by the lender.

I placed 4 bids on the island ( Hilo , Naalehu, and Kailua-Kona) and finally got accepted on the 4th attempt LOL. 

[Sequoia Heuer]

I live on the Big Island in lava zone 2 and my insurance rates went from 1500 a year to 6000 a year after the 2018 eruption. Everyone who had insurance got paid out if their house got covered. 

[Carlos Ptriawan]

Thanks, this is the information that I'm looking for.