Own property in Florence’s path? Here’s what Canadians need to know about hurricane insurance

The return of hurricane season in the U.S. has brought with it an all-too-familiar question: how can Canadians who own property in the U.S. insure their property during a hurricane or flood?

Hurricane Florence rose through the ranks from a tropical storm to a major hurricane over the past few days, prompting evacuation orders for over one million people in South Carolina, North Carolina and Virginia. While originally a Category 4, Florence was downgraded to a Category 3 Wednesday afternoon.

But it turns out many Canadian snowbirds may be impacted by the coming landfall.

A report by the National Association of Realtors from February revealed that between 2016 and 2017, Canadians were the second most active group when it came to buying American real estate, purchasing a total of US$19 billion in residential property.

Furthermore, Canadians looking to become U.S. property owners typically purchase properties that can be used as vacation homes.

Over the past few years, the east coast has become an increasingly popular vacation spot.

What are Canadians’ insurance options?

Most flood insurance in the United States is provided by FEMA through the National Flood Insurance Program. Homeowners in areas that are designated flood hazard zones must have insurance in order to qualify for federally backed loans.

Unfortunately, for Canadians who own property on the popular Myrtle Beach strip or elsewhere on the Carolina coast — which is directly in Florence’s path — U.S. citizenship or permanent resident status is required to qualify for federally backed mortgages.

This eligibility criteria likely excludes many Canadian snowbirds, Global News previously reported. Therefore, Canadian property owners would need to purchase non-government-backed flood insurance from a private broker.

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Furthermore, according to Lynne McChristian, a representative for the Insurance Information Institute, whether or not your mortgage is required to include hurricane and flood insurance depends on the broker.

“This goes back to the mortgage company. If there’s a mortgage, (property owners are) required to have property insurance. If they live in a flood zone, the mortgage company may also require flood insurance,” she explained.

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McChristian notes, however, that even if your mortgage provider doesn’t require hurricane and flood insurance, purchasing it anyway is “one of the smartest things somebody can do … if you live in any coastal area or any area where you can see the water or it can see you.”

However, if you haven’t purchased flood and hurricane insurance yet, McChristian says it’s too late for properties in the path of Hurricane Florence.

“What insurance companies typically do is when a storm has been named, they stop writing new coverage. It creates something that’s termed ‘moral hazard.’ Then people that more than likely expect to file a claim will get insurance because they expect something to happen … if somebody does not have property insurance right now, they would not be able to get it.”

She warns Canadians who own condo units in beachfront resorts that the insurance policies they’re paying into as part of their occupancy agreements only cover the structure of the condo. In order to be reimbursed for the contents of the unit, tenants must additionally purchase “contents insurance.”

“The condo association will pay for structural damage, but it’s up to the tenant to pay for anything inside the unit,” says McChristian.

Insurance companies located in the areas projected to be most affected by the storm had already evacuated when Global News reached out for comment.

What could the damage look like?

American insurers are bracing for what could amount to $20 million in losses as Florence barrels towards the Carolinas and Virginia.

North Carolina has the highest property and casualty insurance premiums of the three states at $16 billion, followed by Virginia at $13.6 billion and South Carolina at $9.5 billion, according to Citi.

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“In North Carolina, we estimate Travelers losses would be about $42 million for each $1 billion in insured losses, followed by Allstate at $37 million, Chubb at $25 million and Progressive at $21 million,” wrote Citi analyst James Naklicki.

The storm is expected to strengthen through Wednesday and make landfall over the next few days. Several days of rainfall are expected to reach 25 to 50 centimetres over North Carolina and Virginia.

Losses from Florence could be on par with those from two previous storms: Hurricane Hazel, which ravaged North Carolina in 1954, causing $15 billion in losses, and Hurricane Hugo in 1989, which caused $20 billion, according to a report from risk-modelling firm RMS on Tuesday.

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“As we look back at previous events, although hurricanes making landfall in the Carolinas are rare, the losses through this triple-threat of storm surge, wind and inland flood could also be significant,” RMS said in the report.

Global Affairs Canada issued a statement Wednesday saying the areas to be avoided extend from Edisto Beach in South Carolina to the North Carolina-Virginia border, including Pamlico Sound and Albemarle Sound.

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Federal officials are asking Canadians in affected areas to sign up for the Registration of Canadians Abroad service, which will allow the Canadian government to reach them in case of an emergency.

—With files from the Associated Press, Reuters and Global News journalist Erica Alini