Tropical storms and hurricanes can have a big impact on real estate closings even if the property is not directly in the storm’s path. In some cases, insurance companies will temporarily stop binding coverage for areas of potential impact. No insurance means no closing. Knowing how to guide your buyers and sellers can help ensure calmer conditions at closing during hurricane season.
When do insurance companies stop binding coverage?
Once a tropical storm/hurricane watch or warning has been issued by the National Weather Service for an area, insurance companies may no longer issue new policies or “bind” coverage. When insurance companies are in this non-binding status, no insurance can be issued until the storm passes.
When should buyers shop and bind coverage?
Typically, most homebuyers do not shop and “bind” their coverage until just before their closing date. During storm season, however, homebuyers should shop and select an insurance policy as soon as the closing date is set. Homebuyers should ask their insurance agent if any additional steps may need to be taken to ensure the home will be covered as required at closing, even if a bad weather alert occurs.
How should I prepare my sellers?
Do not assume all homeowners have insurance coverage. If the homeowner does not have a mortgage on the property, then they are not required to have or maintain insurance coverage. Ask your sellers about their homeowners insurance policy and verify if the property is in a flood zone. Homeowners should keep their policy in place through the recording of the deed, which can take place a few days after the closing date.
What happens after the storm has passed?
Unfortunately, additional delays can occur even after the storm passes because lenders may require a reinspection of the property to confirm no substantial damage occurred. This is especially true if the home resides in a FEMA-designated disaster area. This type of reinspection can range from a simple visual inspection by the lender to a full appraisal of the property.
Hurricane season began June 1, 2020 and ends November 30, 2020. Encourage your clients to shop early for their homeowners insurance and stay safe this hurricane season.
By: Marlene Sheard
Marlene is a mortgage marketing representative for Ameris Bank and previous sales and marketing president for her local Home Builders Association. She enjoys sharing her experiences for the buying, selling, and financing of homes.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.