Hamptons Homeowners Beware: The Ins And Outs Of Home Insurance

Insurance is a critical aspect of buying and selling homes anywhere, but is especially so on the East End of Long Island with its proximity to water, whether it be ocean, bays, creeks, lakes, or streams. Damage caused by storms, hurricanes, and nor’easters are not uncommon occurrences for residents of the Peconic Bay Region. I recently spoke with Laura Kearney and Alison Schmidt, insurance professionals at Cook Maran Associates, who has offices in East Hampton and Southampton, where I teach real estate classes. As insurance professionals with ties to the real estate industry, I thought Hamptons.com readers would benefit from my conversation with them.

I started by asking what the basics that realtors and the public should know about this type of insurance?

Alison: I say, if it’s a new purchase, start working on your insurance sooner rather than later because the process may take longer than you might anticipate. You can’t just pick up the phone and call Allstate and expect a policy. It’s a much more difficult insurance market now.

Is there anything a buyer might do in advance of identifying a property?

Laura: The real estate agent can check certain facts about the properties they list before showing them to buyers. For instance, they can find out if the current owner has an elevation certificate, and they can call us to find out if the property is in a flood zone and we will furnish them with a printout. It makes the realtor look more professional.

What specifically does a homeowner’s policy cover?

Laura: Homeowner’s insurance is harder to get than flood. It covers anything that can happen to your property, including fire and theft. Anything other than flood.

How can a buyer get an elevation certificate?

Laura: They can get it from an engineer or surveyor.

Alison: I usually tell a buyer to ask the owner who did the original survey and order it from them. If not, we can recommend a number of local people who do them.

How long does it typically take to get an elevation certificate?

Laura: It depends on the time of year. During the selling period it could take six weeks, so if the seller already has one, it will save the buyer time and money. They cost about $1,200. As soon as they go to contract, the buyer should start working on getting the elevation certificate, if the owner doesn’t already have one.

Who requires the certificate?

Laura: The bank will require it only if the home is in a flood zone.

What are the types of flood zones that exist in our area?

Alison: We see three types. Mortgage companies won’t require flood insurance if the property in is an X zone. Higher risk zones are the A and B zones and mortgage companies will require flood insurance. In order for us to accurately quote the cost of that insurance, we need an elevation certificate.

Which carriers do you place policies with and are they competitive?

Laura: We use Wright Flood. All flood policies are placed through the federal government and the rate is the same from carrier to carrier. The limit on the dwelling is $250,000 and $100,000 on contents.

Other than location, what else affects the cost of flood insurance?

Alison: Where the mechanical equipment is located is a big factor, and the age and quality of the construction. Homes next to each other can cost very different prices because it depends strictly on the particular property. Also, because so many of the homes out here are secondary homes, carriers want to insure their primary residences as well as their autos. They don’t want to just insure the higher risk second home.

Laura: If the buyer will place all of their insurance with the same carrier, it could be the difference between $8,000 and $25,000 a year.

If the property is not located in a flood zone and the homeowner wants protection from flooding, how much would a policy cost?

Laura: For a primary residence, $477.

Alison: Because FEMA is in debt due to large payouts, they have increased rates and surcharges and are trying bringing rates into line with costs.

Laura: Realtors can help their buyers by getting a copy of the homeowners existing flood policy if there is one, because while homeowners insurance is not transferable, flood insurance is.

Please clarify something for our readers. It is my understanding that “Hurricane Sandy” was not a hurricane?

Laura: That’s right. If it were, rather than the homeowner policy deductible kicking in, it would have been the hurricane deductible, which is much, much, higher. The last hurricane we experienced was “Bob” in 1991.

What insurance concerns should homeowners who want to rent out their homes be aware of?

Alison: You should call your agent and make sure that your policy will cover you.

What if it’s insured as a primary residence and the owner is renting it out?

Laura: The insurance company could decline the claim, pay the claim and back-charge the owner, or pay the claim and cancel the policy.

Alison: Insurance companies may have their own exclusions included in the policy. That’s a reason to check with the insurance company.

What insurance concerns should a tenant have?

Laura: The insurance company that insures their primary residence may allow them to add the rental property to their primary policy. The landlord and the tenant must each have their own liability insurance in place. Neither can be added to the other’s policy. If the property they are renting is their primary policy, then they should get a tenant’s policy. It costs $300 annually.

Will you assist realtors with these landlord tenant insurance issues?

Laura: We want to make the realtors job as easy as possible, as well as their clients and customers.

Alison: A realtor should never lose a sale over an insurance issue. If an insurance issue is a deal-breaker, the realtor is working with the wrong agent.