House damaged by Hurricane Katrina.
Damage from Hurricane Katrina | Photo Credit: Barcroft TV

Is It Covered? – Named Storms

By BreAnn Stephenson

Welcome to our “Is It Covered?” series. For a fuller introduction of the series, read HERE. We hope these quick reads will help you increase your understanding of your insurance coverage, clear up confusion and avoid preventable losses!

So, what’s the confusion?

If you have properties in coastal locations, it’s not always clear if you have coverage when a tropical storm or hurricane comes through. Damage can be caused by the force of the winds, rain driven by those winds, storm surge and flooding. Some carriers get very specific about separating these coverages versus covering damage occurring in one storm event under the Named Storm peril. To add to the confusion, each carrier usually draws its own lines as to what qualifies as “coastal”, often referred to in policies as “Tier 1” or “Tier 2”. Some carriers draw their coverage lines according to counties, while others use a certain distance from the coast. Still others may use a combination of both. Clear as mud?

What constitutes a “Named Storm”?

A sample policy definition may look like the following:

“A named tropical storm or hurricane means a storm system that has been identified and named a tropical storm or hurricane by the National Hurricane Center of the National Weather Service. For purposes of this exclusion the duration of such a tropical storm or hurricane shall be deemed to include the period during which the tropical storm or hurricane conditions exist and the 72 hours following the termination of the final tropical storm or hurricane watch or warning issued by the National Hurricane Center of the National Weather Service, with respect to such system.”

*As insurance policies may vary, please check your own policy for language specific to your covered property.

Can you explain “Tier 1” and “Tier 2”?

First, Tier 1 and 2 areas usually start the tip of Texas and snake around the Gulf of Mexico and Florida, continuing up the Eastern Seaboard. In other words, the Pacific Coast is usually left out of the Tier system. Generally speaking, Tier 1 areas are typically those that are the counties right along the coastline, while Tier 2 are typically the counties located one more county in from the coastline. That stated, some carriers will define Tier 1 to extend a certain amount of miles inland from the coast and Tier 2 yet another specified amount of miles beyond Tier 1 inland. As you can imagine, it is very important to know what tier your property sits in and how coverage is affected in that tier.

What types of damage could be excluded?

As mentioned earlier, some carriers make a distinction between damage caused by storm surge, wind damage and damage caused by flooding. It is important to know that even if you have Named Storm coverage, you still must purchase a separate Flood policy in order for damage from inland flooding to be covered.

What happens if I don’t have “Named Storm” included in my policy?

If you are in an area where your property policy excludes coverage for Named Storm, such as in Tier 1 or Tier 2, you will need to purchase additional coverage if you would like to be covered when the next tropical storm or hurricane rolls through. Though it may not happen frequently, catastrophic coverage like Named Storm can be vitally important as the damage can be some of, if not the most costly property damage you may experience. To put it simply, you could lose your entire investment.

Is there a way to add coverage for “Named Storm,” and does it cost extra?

Yes, your agent can typically either add Named Storm coverage or may set up a separate policy specifically for that peril. Adding Named Storm does typically increase the premium significantly as most catastrophic coverages (Flood, Earthquake, etc.) do.

What does the lawyer-y-speak version of this exclusion look like in my policy?

Sample policy language may look similar to this:

Named Storm Exclusion

“We will not pay for loss, damage or expense caused directly or indirectly by or resulting from a named tropical storm or hurricane to a property located in a county listed above. Such loss, damage and expense are excluded regardless of any other cause or event that contributes to or aggravates the loss, damage or expense, whether concurrently or in any sequence to the loss.”

The policy may then specify a list of counties that define Tier 1 and Tier 2 areas or may state something similar:

“Named Storm is excluded in Tier 1 and 2 in Texas and within 100 miles of the coast of Louisiana, Alabama, Mississippi. Named Storm is excluded in Florida. Named Storm is excluded 25 miles from the coast in Georgia, South Carolina, North Carolina, Virginia, Maryland, Delaware, New Jersey and New York. Named Storm is excluded 1 mile from the coast of Rhode Island, Massachusetts, New Hampshire and Maine.”

Windstorm or Hail Exclusion

“We will not pay for loss, damage, or expenses caused by or resulting from:

  1. Windstorm or hail regardless of any other cause or event that contributes concurrently or in any sequence to the loss or damage; or
  2. Rain, snow, sand or dust, whether driven by wind or not, if the loss or damage would not have occurred but for the windstorm or hail.

But if windstorm or hail results in a cause of loss other than rain, snow, sand or dust, and that resulting cause of loss is a Covered Cause of Loss, we will pay for the loss or damage caused by such Covered Cause of Loss. For example, if the windstorm or hail damages a heating system and fire results, the loss or damage attributable to the fire is covered subject to any other applicable policy provisions.” (This type of exclusion language may be followed by a list of affected areas or counties.)

*As insurance policies may vary, please check your own policy for language specific to your covered property.

How much can this type of damage cost me?

Any catastrophic event has the potential to completely destroy a property and cause severe or fatal injuries. You may be lucky and have little damage from a Named Storm, or you could suffer a total loss of your investment.

What can I do to protect myself?

First, know what is in your policy: Read the sections of your insurance policy that address Water, Wind/Hail and Named Storm. It is important to know both what you are and are not covered for. If you don’t understand your coverage or have questions, don’t hesitate to ask your agent who should be happy to help you! If you don’t have Named Storm coverage currently and are in an area of increased risk, ask your agent about purchasing Named Storm coverage.

Be sure any remodeling meets current code: If you do any improvements to your property, make sure they are done up to current code standards regarding Wind/Hail and Named Storm. States that experience a frequent occurrence of Named Storms, such as Florida, typically have specific building standards to help a building better sustain the increased wind speeds acting upon that building in a catastrophic storm.

Give your tenant information about storm safety: You may not always rent to a native of the state, and though they may be familiar with a greater frequency of Named Storms, they still may not know how to plan for an emergency. As a part of your welcome packet you may want to include information about how to make an emergency kit and resources to find safe shelter and first aid during a catastrophic event.

Make sure your tenant understands their personal property isn’t covered by your insurance: Require your tenants to carry renters insurance in the lease and enforce it. Let them know any insurance you carry on the property as the owner does not apply to their personal belongings. Impress upon them the importance of reporting any hazardous conditions on the property to you or your property manager immediately. You may want to include a section in your lease where the tenant acknowledges their understanding of these items.

Further Reading

Check out more articles like “Storm & Hurricane Prep: 15 Essentials for your ‘Go’ Bag”, “Do You Know the Difference Between Flood, Water Damage & Sewer Back-Up”,  and “Storms on the Horizon”!

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