Homeowners insurance covers damage from events such as: fire, theft, vandalism, water and perhaps wind. According to Paul Sattler, branch manager of the West Palm Beach, Fla., office of Insurance Express, several factors greatly affect insurance costs: the home’s age, construction materials and proximity to the ocean.
“Homes built after 2001 are far less expensive to insure than homes built prior to 1995,” Sattler said. For example, the insurance premium for a home insured for $300,000 replacement value, built after 2001, might run $1,500 annually. That same home built before 1995 could cost double to insure. Another factor in insurability and cost is the building materials. “Wood-framed homes are nearly impossible to insure. Cinder block, stucco, masonry are the preferred building materials,” Sattler added. Homes near the ocean (loosely defined as east of Interstate 95) may require separate wind coverage, because it may not be available as part of the standard homeowners policy.
Second-home buyers contemplating a home near the ocean or Gulf of Mexico need to factor the cost of wind coverage into their buying decision and annual operating budget. Sattler explained that “wind coverage may add as much as 70 percent to the cost of the homeowners insurance premium, if it is available at all, as part of the standard homeowners policy.” For folks on the Gulf, an additional risk: Sinkholes must be examined before buying that second home. To quantify these special risks, buyers should obtain a wind mitigation report. That report is essentially a home inspection, evaluating the home’s ability to resist wind and storm-related events. Lenders and insurers will insist on obtaining that report before agreeing to lend on or insure your second home. Those reports are generally good for five years and cost less than $100.
Flood insurance is a standard policy administered through the federal government for homes in identified flood zones. The National Flood Insurance Program offers policies for single-family homes, condominiums and tenants. Policies are designed to reimburse homeowners for the damages caused by floods. Nominal annual premiums for contents coverage start at $49. Specific information regarding the National Flood Insurance Program, as well as the names of local insurance agents who can sell you a policy, is available at the Federal Emergency Management Agency’s Web site.
Historically low home prices, interest rates and even airfares make the present time appear to be the perfect time to take that plunge and invest in a warm-weather second home that you can enjoy for years to come.
Harvey S. Jacobs is a real estate lawyer in the Rockville office of Joseph, Greenwald & Laake. He is an active real estate investor, developer, landlord and lender. This column is not legal advice and should not be acted upon without obtaining legal counsel.
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