Our previous blogs discussed Homeowner and flood insurance for your Outer Banks home. Unlike many geographic areas, there is also another insurance requirement in the Outer Banks. Most homeowner’s policies exclude wind and hail coverage. As you can imagine, wind and hail coverage is very important for any property on the barrier islands. Just about any weather loss will have a wind element. Since the risk from hurricanes and wind is higher than many geographical areas, an insurance pool was invented to provide coverage to homeowners for this risk.
NCIUA – Coastal Property Insurance Pool (CPIP)
The Coastal Property Insurance Pool, also known as the Beach Plan, was created in 1969 by the General Assembly to provide property insurance, for the beach and coastal areas of North Carolina. The Coastal Property Insurance Pool is not a part of North Carolina State Government but the Plan of Operation for CPIP is subject to review and approval by the North Carolina Commissioner of Insurance.
The CPIP Insurance Pool offers commercial, homeowner and dwelling windstorm coverage to any person (with an insurable interest in property) located in the 18 eligible coastal counties of North Carolina. The Coastal Property Insurance Pool also offers commercial fire and dwelling fire in a more limited area.
The Coastal Property Insurance Pool is known as the “Market of Last Resort”. Usually, property owners are encouraged to obtain insurance in the standard market. If a standard policy cannot be obtained, an Insurance Agent can get you coverage in the Coastal Property Insurance Pool.
Insurance products offered in the Beach Plan are:
- Dwelling Fire (Beach Territories only)
- Commercial Fire (Beach Territories only)
- Homeowner (Beach and Coastal Territories)
- Dwelling Windstorm and Hail (Beach and Coastal Territories)
- Homeowner Windstorm and Hail (Beach and Coastal Territories)
- Commercial Windstorm and Hail (Beach and Coastal Territories)
- Crime (Beach Territories only)
Some of the above products (Homeowner, Dwelling, and Commercial Fire) provide coverage for windstorm and additional perils such as fire, lightning, and vandalism and malicious mischief. These policy forms provide building coverage on a replacement or actual cash value basis. The Windstorm and Hail coverage provided under CPIP, must match as closely as possible the insured’s primary insurance policy. In order to obtain coverage under the CPIP pool for windstorm and hail, you must have an active primary coverage (with an admitted NC carrier) policy that excludes windstorm.
The maximum residential limit of building coverage is $750,000. The limit for personal property is capped at 40% of the approved building coverage.
The maximum commercial combined limit is $3 million. This is
capped at a $6 million aggregate depending on fire wall divisions of the structure insured.
If the coverage required exceeds the maximum building limit of the Coastal Property Insurance Pool, then excess coverage above the limit provided must be purchased to the full value of the property, prior to the issuance of a primary policy by the Coastal Property Insurance Pool.
Follow the Bouncing Rates
Generally, of the three policies you may need to purchase for your Outer Banks home, wind and hail coverage is the most onerous.
In recent years, insurance rates have been a rather contentious issue. In a nutshell, the insurance companies in the pool requested a large rate increase, with greater impact on the coastal areas. Residents in the coastal areas have fought back, insisting the amount of damage and risk to coastal areas does not justify the rates based on claims on the coast compared to inland areas.
While Insurance Commissioner, Wayne Goodwin, decided to lower rates by 9% in Dare, Currituck and Hyde counties in June 2015; this is not the end of the issue. Especially, considering rates were increased by 17% in 2013. Before the commissioners decision, the NC-20 coalition of coastal counties, argued against the industry proposal, asserting that “the indicated rates for eastern NC are excessive, unfair and discriminatory…Filed rates for Eastern NC are almost six times higher than other areas of the state.” The North Carolina Rate Bureau, representing the insurance industry, continues to insist the rates are not high enough.
Willo Kelly, Government Affairs liaison for the Outer Banks Realtors and Homebuilders, warns homeowner to be on the lookout for insurance companies asking policyholders to sign Consent to Rate (CTR) forms. This form “is a loophole for insurance carriers that allows them to bypass the ratemaking process…and to charge up to 250 percent over the NCDOI approved maximum rate as long as a policy holder’s policy is in effect…Home owners should be very wary before signing a CTR form and should shop around for coverage when asked to sign one,” according to Willo Kelly. Furthermore, she says, “Most people sign the form because they don’t know what the form really means”.
The state’s Department of Insurance (DoI) tracks the use of Consent to Rate forms and has noticed an uptick in recent years. “That is something that concerns the commissioner and something we’ve been keeping tabs on,” said, Kerry Hall, on behalf of the DoI.
One can’t live so close to the sound and the ocean without being aware of the risk of flooding and wind damage, either from hurricanes, nor’easters or other events. Let Eillu help you navigate local waters and sail safely in the wind, whether you are buying a home, selling a primary home, a vacation home; or just want to test the waters. We know the local Outer Banks real estate market and will keep you from running aground!