MIAMI—The Atlantic Basin experiences on the average 11 to 12 named storms, six hurricanes and three major hurricanes, according to Global Weather Oscillations (GWO), a hurricane cycle prediction company. The firm predicts the 2015 hurricane season to be a little above average and more dangerous, with 14 named storms, eight hurricanes and three major hurricanes.
This may not the best year to bet on high-deductibles on your hurricane insurance. GlobeSt.com turned to Evan Seacat, senior director at Franklin Street Insurance Services in South Florida, for some wisdom in reviewing your insurance policies before a storm strikes in part two of this exclusive interview. You can still read part one: What CRE Owners Need to Know This Hurricane Season.
GlobeSt.com: When building owners or managers sit down to review their policies, what should they consider?
Seacat: First, they should look at the deductible per building. A 5% deductible is the most common, but some carriers offer a 3% option.
Is it worthwhile to pay a higher premium but less out of pocket when a hurricane hits? That depends. Let’s say a building is worth $10 million. The deductible will be $200,000 less with the lower percentage figure.
What would it cost to upgrade the building after a storm rips through it? Based on that estimate, amortize the difference in the premiums over the number of years without a major storm. If an owner had the lower deductible just before the major storms of 2004 and 2005, he or she would come out ahead.
We haven’t had a major storm in 10 years, so many owners saved money with the higher deductible. But who knows when our good fortune will end. Second, if the property hasn’t had an appraisal in a number of years, order one and use that figure to update the policy. Prices are going up, and the estimated value on the policy may be too low.
GlobeSt.com: Speaking of rising values, multi-family properties are hot. What should owners be doing about those?
Seacat: They should tell tenants to get coverage for their personal property. A lot of people don’t realize that if a storm tears off the roof or blows out the windows, they are responsible for the contents of their apartments. The landlord will not be replacing their big-screen TVs, sofas, beds and personal items. Renters’ insurance is cost-effective and offered by most car insurance companies. Everyone should have it.