Since Superstorm Sandy struck last October, getting coastal homeowners insurance on Long Island has been a been quite a challenge for not just prospective home buyers, but also for existing property owners (those that get dropped by their insurance companies). The fact is, insurance carriers in downstate New York have tightened their coastal underwriting guidelines so much, it has become seemingly impossible for property owners to secure the needed coverage, which in most (if not all) cases, the mortgage lenders require.

For many years now, heavily advertised carriers such as Allstate, State Farm, and Liberty Mutual have either stopped writing, or drastically reduced the amount of homeowners insurance policies being written on LI. Prior to Sandy, many independent carriers offered coverage solutions for homes located on the north shore or the south shore. However since Sandy struck, those independent carriers have reacted in such a way that it is becoming very difficult to secure a policy on a home that is near the water. Here’s why:

Loss History

The biggest change to coastal carrier underwriting guidelines involves the loss history of the dwelling in question. For example with Narragansett Bay, they now look back three years on the property being considered for coverage. If any claims within the last three years are discovered based on the property address (whether you owned the home at the time of the loss or not), they will likely not write you with a policy. Occidental (GEICO Agency’s coastal carrier) is even worse, in that if the home is located in a “Sandy Damage Zone”, the home is ineligible for a policy…even if that home didn’t suffer Sandy damage!

Distance Requirements

While other carriers will consider coastal dwellings near the water, it all depends how close to the water the house is if the company will consider it. For example, Interboro will write a policy on a home that is over 2000 feet away from the water. Ocean Harbor will write homes that are a lot closer to, but that are not literally ON the water (e.g. bay-front or canal-front homes). Then you have carriers like Kingstone that will map each property out manually to see if they will consider insuring it.

High Valued Homes Near The Water

For houses that have expensive replacement cost values (in excess of $1 million), the coastal insurance market tightens even further. High valued dwellings are not typically covered by standard insurance companies. For these types of risks, there are literally about three companies that will consider writing a homeowners policy for say a luxury home on the shore. However, since these are “all peril” policies (practically every cause of loss is covered), premiums for these policies run about double in price compared to standard home insurance policies. On the up side however, these carriers will build in basic flood coverage and optionally, excess flood coverage right onto the homeowners policy. This is good for homeowners that are looking to secure over $250K in dwelling replacement cost to protect themselves against flood losses, which FEMA does not provide.

Excess Insurance Companies

As a last resort, one can consider obtaining a policy with Lloyd’s of London, Lexington, or Soverign to cover a home that is on the water. Unfortunately, these companies are considered “non-admitted” in New York State. This means that in addition to the premium, taxes and fees apply to the policyholder. In other words, it begins to get costly to insure your home, to say nothing about how no consumer protection mechanisms are in place via NYS in the event the carriers become insolvent. Although, these carriers do have “A” financial ratings, so the risk of them going bankrupt is relatively low.

How To Obtain The Coverage

Put simply, if your home is within a mile of tidal flood waters (this includes bays, canals, or rivers leading to/from the bay), the insurance companies you see on TV are not setup to insure coastal hazard area homes on Long Island. The companies mentioned above operate in the independent insurance market, with insurance brokers being their liaisons. Utilizing the carrier access these brokers have, you will be able to obtain the policy you need at a competitive price.