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Tuesday, October 23, 2018

With Hurricane Michael dominating much of the news this week, and in conjunction with Parshas Noach, I thought it would be fitting to touch upon common insurance exposures, and what homeowners should be mindful of when considering basic homeowner’s protection with their agents. It is too common of a scenario where I find homebuyers looking to minimize expenses before closing on their home purchase, that they cut corners when obtaining homeowner’s insurance. Hopefully, this article will help people think twice, and not “miss the boat” (pun intended).

Before closing on a home purchasing, every home buyer is obligated by their lender to obtain homeowners insurance. Most people believe that no matter what happens, they have adequate protection against a disaster. The average homeowner feels secure knowing they have the necessary coverage in the event of a severe weather calamity because of the insurance they obtained before closing. The fact of the matter is, the bank only requires minimum coverage in the amount of the loan, and cannot obligate or demand additional protection. It is therefore highly advisable that a homeowner determine what coverage terms are most suitable for their specific needs and circumstances, beyond the bank’s requirements.

The recent scramble to deal with the fallout from Hurricane Florence highlights just how catastrophic severe weather can be to people and their property. After returning home and assessing the damage post-storm, homeowners assume they can simply call their carrier, file a claim, and will be fully covered. Unfortunately, many homeowner’s insurance policies do not provide full reimbursement from severe weather losses. Hurricanes, tornados, earthquakes and other rare catastrophes may not be covered under a standard homeowner’s policy altogether. It may come as a surprise, but many policies limit reimbursement based on the specific cause of the damage.

Although some enhanced policies cover damage from catastrophic weather conditions, premiums can run higher in regions prone to these severe conditions. For example, hurricanes and tornados that additionally bring about flooding can pose a problem for homeowners who make a claim. An insurance underwriter may conclude that damage from a tornado have limited coverage to the exclusion of water damage. That could mean that water backed up in the street, lakes or pond overflowing into a home - or certain sewer backups might not be covered whatsoever.

Homeowners are advised to clarify review all water-related coverage. Like people who live in flood zones, earthquake riders may be required in some regions of the country. Without this additional coverage, the aquatic destruction caused by these catastrophic events may not be reimbursed. It’s imperative that people living in or around regions prone to tornados and earthquakes carry specific coverages common to the area. Imagine someone losing their home and still owing a monthly mortgage payment?!

Aside from the actual damage these storms bring, the economic impact thereafter is felt well after the cleanup is complete. Hurricane Michael is likely to become the 12th billion-dollar weather disaster to affect the United States in 2018. The biggest takeaway from this overview of severe weather disasters is that homeowners are wise to carefully review their policies and have a clear, concise understanding about their coverage. While minimal insurance is a requirement for most home loans, for a few dollars more, enhanced protection may be worth every penny and bring comfort well beyond the calamity.

Although this article was written before the hurricane made landfall, I wanted to express our heartfelt thoughts and prayers to all those being impacted by the various storms, and wish them the best of luck in the aftermath. Special shout out and happy birthday to Michael Ferber, Sylvia Nachtigal, Karen Rubin and Jacob Strauss.

By Shmuel Shayowitz


Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker, and direct lender. Approved Funding is a mortgage company offering competitive interest rates as well as specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience including licenses and certifications as a certified mortgage underwriter, residential review appraiser, a licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at [email protected]