Hurricane Season May Cost Buyers and Sellers a Fortune so Follow These Tips

The most popular time to buy a home is in the Spring and Summer.  But besides home buying season, it is also Hurricane Season in the Southeast US.  The hurricane season officially begins on June 1 and continues through November 30.  Although hurricanes could form and cause damage before or after these dates.  For 2018, the Weather Channel predicts average to above average intensity in storms, but it only takes one storm.

Sadly, in 2016 so many buyers and sellers were caught off guard by Hurricane Matthew.  Hurricane Matthew caused so much damage in NC and SC that the effects still linger.  There were closings hurricane seasonscheduled and once someone could get back to the homes, some were several feet deep in water.  So the closings often did not happen because the buyers didn’t want a flooded home.  On top of this, many homes did not have flood insurance.  Therefore property owners either had to pay for the repairs, try for assistance from FEMA, or possibly nothing could be done.  So during hurricane season, it is so important to stay on top of all applicable insurances.  Let’s go over some tips for buying and selling homes during hurricane season.  Plus we reveal the biggest insurance mistake a homeowner may make!

Seller Insurance Recommendations in Hurricane Season

Selling a home during hurricane season can be stressful when the weather people start naming storms in the Atlantic.  There are some important tips to remember that could save a lot of money.

  • Review all insurance policies with your agent
  • Consider flood insurance even if not in a flood hazard area
  • Keep all insurances in place through recording of the deed

Just as it is a good idea to review with financial advisors and CPA’s, discussing insurance coverages is very important too.  There are so many things to consider besides the annual premium on insurances.  For instance, an important area is to verify the cost to replace the home is sufficient.  The cost to build a home increases over time so if the policy has not updated lately, it may not be enough to rebuild.  This is true for hazard insurance, wind & hail, as well as flood insurance.  If a home is in a flood hazard area, lenders will require flood insurance on the dwelling to be purchased by the buyer.  During hurricane season, it could actually be a good idea to consider flood insurance as a seller.  But even if the home is not in a high risk flood zone, it would be worth considering flood insurance.  Actually flood insurance in these cases can be very cheap since it is very low risk.  Some flood policies may even be transferred to the buyer.

Finally, DO NOT cancel any insurance policies until you have definitely verified the deed has is recorded in the buyer’s name!  Sure the chances are low of something happening in this small window, but what if it did?  The buyer’s insurance would not take place until the home is in their name, so don’t cancel it until you are sure.

Don’t Make This Insurance Mistake as a Homeowner!

There is one mistake that some homeowners either make to save money or it is just out of necessity.  Paying off a mortgage is a good feeling for homeowners.  Having that payment gone and realizing a big savings can do right much for a budget!  But sometimes a homeowner looks forward to another “savings” when the house is paid off.  That savings can really backfire though.  You see, mortgage companies will require homeowners to cover the dwelling with applicable insurances such as hazard, wind & hail, or flood insurance.  So once a mortgage is paid off, some homeowners will cancel or drastically reduce the insurance coverages on their house.  Since there no longer is a mortgage requirement, homeowners may look to save a little extra money.  Although, dropping insurance coverage can be catastrophic to anyone’s finances in the event of an emergency.  If you are struggling to make insurance payments, reach out to your insurance agent prior to canceling the policy.  Remodeling or replacing a home after damage would not be possible for most that cancel insurance, so try your best to avoid this.

Buyer Insurance Recommendations in Hurricane Season

Buying a home includes many important decisions to make.  These decisions include details of the home, choosing the right mortgage loan, and completing thorough inspections.  But, it is also very important to be diligent in reviewing and binding applicable insurances.  So let’s discuss important insurance tips for buyers.

  • Choose an insurance agent up-front
  • Obtain quotes prior to contract
  • Watch for tropical storm or hurricane warnings
  • Consider binding insurance early
  • Don’t procrastinate!
  • Perform a walk through prior to closing

Do Your Insurance Homework Early During a Home Purchase

It cannot be stressed enough how important it is to choose an insurance agent very early in the home buying process.  Additionally, prior to contract make sure to obtain and thoroughly discuss insurance options along with premiums with an agent.  As mentioned earlier, even if a property is not in a flood hazard area, discuss flood insurance with your agent.  It could be very cheap in a low risk area.  These discussions will help a buyer have a very accurate total mortgage payment up-front.  Plus, it provides knowledge of the types of insurances required and available for the property.  Check out one of our articles, “Understand why and when flood insurance is required on a purchase“.  This article gives a more thorough explanation of flood insurance.

Watch for Tropical Storm or Hurricane Warnings While Buying a Home

Have you heard of the hurricane hunters that ride in special planes through hurricanes so they know what the storm is doing?  Well, you don’t have to do that but you should be wary of storms approaching your area.  Once the storm is “In the Box” as insurance companies call it, insurance agencies will not write new policies.  Therefore, if a storm sneaks up on you days before closing and then insurance isn’t available, you cannot close.

Consider Binding Insurance Early

Typically, insurance companies will bind an insurance policy very early with an effective date of the closing.  “Binding insurance” means to basically put the policy in force or to have an effective date.  This can be particularly helpful in times where storms are on the way.  Although keep in mind once the insurance is bound for a certain date, you cannot close prior to the insurance effective date.  So make sure to stay in constant communication with your mortgage lender, closing attorney, Realtor, and insurance agent on binding the insurance.

Perform a Walk Through Prior to Closing After a Storm

Of course, if there is a storm prior to closing it is imperative to have a walk through of the home with your agent.  If there has been a tremendous amount of rain, wind, or other, consider bringing a licensed home inspector back out to the property.  This is a good time to see how the property handles drainage after a storm as well.  Actually, all closings should have a walk through just prior to closing by the buyer or at least the buyer’s agent.  The walk through confirms the house is still in the same or better condition as the last time it was viewed by the buyer.

How to Determine if a Home is in a Flood Zone

Since we are talking hurricanes, let’s talk a little more about flood zones.  What if you own a home and not sure if it is in a flood hazard area?  Or what if you are researching a home as a Realtor or buyer in order to see if it is in a flood zone?  Well, there are a few ways to research for properties that may be in a flood zone:

  • Floodsmart.gov
  • County GIS flood map
  • Call local zoning board

Floodsmart.gov is a great resource to research flood insurance requirements as well as find flood insurance agents.  Keep in mind that FEMA may change flood maps in each area.  Typically these are reviewed about every 7 years, but there could be interim changes when necessary.  Also homeowners are not notified when FEMA is reviewing their area.  By reviewing local flood maps or the FEMA schedule, one can find out when the local area will be reviewed.  This could be important if an area changes to a flood hazard area because an appeal must be made within 90 days.  So familiarize yourself with your local county GIS flood map.  Plus know that you can call or visit your local zoning board for valuable information.

Choosing an Experienced, Local Insurance Agent

Each area of the country has different weather risks such as tornadoes, mudslides, earthquakes, snow, and blizzards.  Then, insurance companies have certain experience or risk tolerance of some of these areas more so than others.  In coastal southeast US, there is the risk of high winds and hurricanes.  It is such a risk in some areas that many homeowners insurance policies exclude coverage for these events.  Therefore homeowners must buy a separate wind & hail policy for protection against these storms.  We have even seen that many companies will not insure properties on the coast.

One of the best tips we can provide is to at least talk to a local, experienced insurance agent.  Choosing a company that is not only highly rated, but experienced in potential claims popular for the area is paramount.  Often the local companies will have lower premiums for these coverages as well.  Check out another of our articles that explains popular insurance types as well as terms often used.

Homeowners Insurance Tips for Buyers

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Written By: Russell Smith