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Nov 6, 2012 4:10 PMPublication: The East Hampton Press

Home Insurance: Who Picks Up The Tab For Sandy?

Nov 6, 2012 4:59 PM

A ferocious storm has gouged out the cliff below your beach house, leaving it dangling above the surf. Who’s going to fix the problem—or, rather, who’s going to pay to fix it?

Private homeowner’s insurance is available for oceanfront homes, with premiums typically pegged at 50 to 80 cents per $100 of the value of the house. The insurance premium on a home with a replacement cost of $5 million, then, would be between $25,000 and $40,000 per year, according to one source in the industry.

But having homeowner’s insurance doesn’t necessarily mean you’re in the clear after a storm like Sandy has swept through town.

“There are two perils you’re concerned about in a hurricane,” explained George Yates of Dayton Ritz & Osborne Insurance of East Hampton and Bridgehampton. The first is wind damage, which is typically covered under an at-risk homeowner’s insurance only after a hefty hurricane deductible—an additional out-of-pocket amount during actual hurricane events, hovering near 5 percent of the dollar value of the home, or about $50,000 for a $1 million house, in these parts—has been met. “And that’s a big number for people to absorb,” Mr. Yates said.

Governor Andrew M. Cuomo announced on Monday that insurance providers will not be allowed to apply the deductible this time around “because Sandy did not have sustained hurricane-force winds when it made land in New York.” So homeowners will be in the clear on that account—at least this time around.

There is another “peril” in a hurricane, Mr. Yates pointed out—damage caused by flooding. Flooding is normally excluded from the coverage in a homeowner’s policy; rather, flood insurance is sold to some homeowners through a subdivision of the Federal Emergency Management Agency, with the payout risk borne by the federal government. In “high-hazard” zones, homeowners might be required by their mortgage holders to take out flood insurance, although those in low-hazard zones are typically not forced to buy it.

Even for those with flood insurance, however, the maximum FEMA payout is only $250,000 for a house and $100,000 for its contents—relatively small change for waterfront real estate on Long Island’s South Fork.

In addition, most flood policies provide little coverage for below-ground-level damage, like “water in your basement,” according to Kathy Weinheimer, senior vice president of industry relations for the Independent Insurance Agents and Brokers of New York. Nor does FEMA provide assistance for damage to beaches, dunes, or underwashed waterfront properties. “Land itself is typically not something that can be insured,” Ms. Weinheimer said.

“Excess flood insurance,” which covers certain losses beyond the maximum amount that FEMA will pay out, is sometimes offered through private insurance carriers, although the premiums for that tend to be high. “Typically, they do pay a lot of money,” Mr. Yates said of those who subscribe to it, but he called it “a good investment.” Private carriers are selective about whom they will cover with excess insurance, according to Mr. Yates.

“A typical homeowner’s policy would not cover land,” Ms. Weinheimer said. “It’s really intended for the building structure itself. It’s physical property versus the land.”

Both Ms. Weinheimer and Mr. Yates said that most homeowner’s insurance policies would not be likely to cover damage to landscaping in a storm. “If you just have a tree down in your yard, you’re pretty much on your own to pick that up,” Ms. Weinheimer said. “If it falls on your house—there might be some coverage under that aspect; it depends on your coverage,” she said.

Likewise, Ms. Weinheimer said, “sand erosion is not really an insurable risk.” In the Hamptons that could mean paying hundreds of thousands of dollars to replenish tens of thousands of yards of lost and precious granules that can sell for about $22 a yard.

“The erosion thing is not a covered situation in either the home or the flood policies,” concurred Tim Brenneman of Cook Hall and Hyde in East Hampton. “It’s kind of ‘buyer beware’ when it comes to an oceanfront property,” he said.

Mr. Brenneman explained that there are a handful of insurers—Chartis, Fireman’s Fund, ACE, PURE and Chubb—that typically seek to insure homes and individuals “with higher-valued properties and all the things that come with them,” such as exotic cars, jewelry and artwork. They tend to charge more money but also to have contracts “that are generally a little more generous” in terms of payout ceilings as well as a relatively “no-hassle approach.” Even so, Mr. Brenneman said, “it’s not that erosion would be covered with Chubb but not with somebody else.”

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The photos attached to the article are great and illustrate the damage done.

I must point out, however, that the yellow "home" which collapsed is part of a "hotel" which I believe is in Hampton Bays. Additionally, the large "home" listed as being between Quogue and East Quogue is the Neptunes/Drift Nightclub and is also located in Hampton Bays
By Nature (2966), Hampton Bays on Nov 8, 12 12:46 PM
There is one other certainty out of this storm is that all of our premiums will be going up. Hopefully, this increase will be moderate. Unfortunately, as I recall it was after Katrina that most major insurer's dropped clients and Long Island and many residents had to buy more expensive insurance from smaller carriers willing to carry the risk. Will they still be around after this storm? How solvent will they be?
By Toma Noku (616), uptown on Nov 9, 12 11:22 AM