Is Your Insurance Coverage Ready?
From Hurricane Matthew to Hurricane Florence, destructive tropical cyclones have become distressingly familiar to South Carolinians in recent years, even for a state accustomed to the threat of hurricanes. Hurricane Florence managed to bring double flooding events — one from extreme rainfall and another from river drainage, and the SC Emergency Management Division counted nearly 600 homes as either severely damaged or completely destroyed by the storm.
Alongside the plans that public safety officials make for responding to future storms, officials in cities and towns should also focus on making sure that their properties are adequately covered by insurance if a big storm were to impact the area after hurricane season begins June 1.
The best way to do this is to develop and maintain a complete list, or schedule, of assets needing insurance coverage.
"Checking over property schedules can help prevent a property from being valued incorrectly or prevent a city from discovering after a loss that a property was not covered. It's critical to make sure that all assets, including newly built facilities or newly acquired assets, are added to the schedule," said Heather Ricard, director of the Municipal Association of South Carolina's Risk Management Services.
With the aim of making sure valuations are up to date, the SC Municipal Insurance and Risk Financing Fund, administered by the Association, provides appraisals at no charge to members about every five to seven years for buildings that are valued at or above a certain amount. For coastal areas, which often have the greatest exposure to hurricane damage, these appraisals are offered for all buildings valued at $10,000 or greater. For inland locations, the threshold is a $100,000 valuation. In between appraisals, values are trended to keep up with inflation.
City and town staff should also review and confirm insurance coverage before they need it. Here are a few key issues to consider:
Understand the amount of money that would be paid if a building were to be destroyed. Consider whether insurance would cover the building at replacement cost or on a basis of actual cash value. Coverage written on an actual cash value basis, such as for automobiles, would include a deduction for depreciation, which moves the potential payout lower over time even though the cost of replacement would not decline.
Know whether coverage includes a coinsurance provision, which requires cities to cover a certain percentage of the value of buildings and building contents. If a city does not insure the property for this minimum amount and experiences a loss, then the city would have to pay a coinsurance penalty amount before any deductibles are applied.
Know whether buildings are located inside high-hazard flood zones, which are any zones beginning with the letters A or V. The National Flood Insurance Program offers a maximum coverage of $500,000 for a building and $500,000 for contents. If a building is in a high-hazard area and is not insured to these amounts, then any claims payments may be a payout on top of the NFIP coverage. The Federal Emergency Management Agency offers a Flood Map Service Center.
2019 Storm Names