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What Is Coastal Commercial Property Insurance?

Austin Landes, CIC
10 minute read

Coastal property has plenty of benefits, like stunning views, ocean access, and a laid-back lifestyle. But it also comes with unique challenges, particularly when it comes to securing insurance. Coastal business owners often face higher premiums, limited options, and strict requirements. But finding coastal property insurance doesn't have to be difficult. With the right knowledge and resources, business owners can protect their investments effectively.

What is commercial property insurance for coastal areas?

Coastal commercial property insurance is a specialized type of insurance designed to protect businesses located in coastal areas (usually along the eastern coast of the US and the gulf of Mexico). These areas face additional risks like hurricanes, tropical storms, flooding, and wind damage, which are common exclusions on other types of property insurance. Coastal property insurance covers damage to your building and business property caused by these events, as well as standard perils like fire, explosions, vandalism, and riots or civil unrest.

Perils That Coastal Properties Face

Standard commercial property insurance covers many “causes of loss,” but typically doesn’t cover all of the perils that coastal properties face, like:

  • Natural disasters: Coastal areas are highly susceptible to natural disasters like hurricanes and tropical storms, which can cause extensive damage.
  • Wind damage: High winds from hurricanes and storms can cause roof damage, broken windows, and even complete structural failures in severe cases.
  • Flooding: Coastal properties are at high risk for flooding due to heavy rainfall and rising sea levels. Water can cause extensive damage to both the exterior and interior of buildings.
  • Storm surges: Storms can cause abnormal rises in seawater levels, known as storm surges, which can lead to severe flooding.
  • Erosion: Constant waves and storm surges can lead to erosion, undermining the foundations of coastal buildings and infrastructure.

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What coverages do coastal property owners need?

Commercial property insurance generally provides comprehensive coverage, but standard policies may not cover the following areas. To protect their investment, coastal property owners should make sure they have these coverages.

Wind Insurance

Standard commercial property insurance policies often exclude wind damage, especially from named storms (hurricanes and tropical storms officially recognized and named by meteorological authorities). Coastal commercial property insurance typically includes wind insurance or offers it as an additional endorsement.

Flood Insurance

Flood insurance provides coverage for damages to the structure and contents of the property caused by flooding. It’s essential for coastal properties due to the high risk of flooding from storm surges, heavy rainfall, and rising sea levels, but it’s usually excluded on standard commercial property insurance policies. Coastal property owners should make sure they have this coverage to help them recover from flood-related losses.

Business Interruption Coverage

Business interruption coverage is vital for coastal business owners. This insurance compensates you for lost income and operating expenses if your business is temporarily closed due to a covered peril, such as a hurricane or flood. It helps you maintain financial stability and resume operations quickly by covering payroll, rent, and other ongoing expenses while you recover from the incident.

Insurance Issues Unique To The Coast

The challenges faced by insurance markets like Florida and other coastal states have been in the news lately. Let’s dive into these challenges in detail.

High Deductibles

Thanks to the increased risk of natural disasters, coastal properties often face much higher deductibles compared to properties located inland. Insurance companies impose these high deductibles to mitigate their own financial exposure. Property owners must often pay thousands of dollars out-of-pocket before insurance coverage kicks in, which can be a big financial burden. Coastal commercial property owners should understand and plan for these high deductibles.

High Premiums

While your deductible is what you must pay before your coverage kicks in, your premium is what you pay up-front for your policy (e.g. your monthly or yearly policy amount). Like deductibles, insurance premiums for coastal properties are typically much higher than those for properties in other parts of the country. Coastal commercial property owners need to budget for these higher premiums and compare quotes for the best deal.

Limited Insurance Options

The higher risk associated with coastal properties means fewer insurance companies are willing to provide coverage. Many major insurers avoid high-risk areas altogether, leaving property owners to seek specialized insurers. In addition to limited options, the lack of competition can result in less favorable policy terms. Coastal commercial property owners should consider their options carefully and work with an experienced insurance broker like LandesBlosch to find suitable coverage.

Specialized Risk Assessments

Coastal properties often require specialized risk assessments due to their vulnerability to natural disasters. Insurance companies conduct thorough evaluations, considering factors like proximity to the shore, elevation, and historical weather patterns. These assessments can influence the availability and cost of insurance. Understanding the specific risks your property may face can help you secure better insurance terms.

Scrutiny on Building Construction

Insurers place more scrutiny on the construction of buildings in coastal areas. Factors such as the type of materials used, building code compliance, elevation, and proximity to the water are heavily evaluated to assess the risk. Buildings constructed to withstand high winds and flooding may receive more favorable insurance terms. This scrutiny ensures properties are more resilient, but can also increase construction and renovation costs.

Mitigation Requirements

Insurers may require policyholders to implement certain mitigation measures, such as installing storm shutters, reinforcing roofs, using storm-resistant materials, and maintaining proper drainage systems, to reduce potential damage. Getting ahead of these requirements can help commercial property owners find the right coverage, faster.

Separate Wind/Hail Deductibles

Coastal property insurance policies often include a separate deductible for wind and hail damage. These deductibles are often a percentage of the property's insured value rather than a fixed amount and are typically higher than the standard property damage deductible. They can potentially lead to substantial costs. Coastal commercial property owners should be aware of these separate deductibles and factor them into their financial planning.

Named Storm Deductibles

In addition to the wind/hail deductible, many coastal property insurance policies have a named storm deductible. This higher deductible applies when a hurricane or tropical storm that has been officially named causes damage. Like wind deductibles, they’re typically higher than standard deductibles and can significantly increase your out-of-pocket costs after major storms. This is another reason it’s essential to understand all the details of your policy.

Anti-Public Adjuster Endorsements

Public adjusters are professionals hired by policyholders to handle their insurance claims and negotiate with insurers. Some insurance policies include anti-public adjuster endorsements, which restrict property owners from hiring these agents, complicate the claims process, and leave owners at a disadvantage when dealing with insurance companies. Coastal property owners should review policy terms carefully and understand the potential impact of these endorsements on their ability to manage claims.

Trust LandesBlosch to find the best coastal commercial property insurance

Based in the center of the country for over a century, LandesBlosch has a deep-rooted understanding of the insurance landscape. This extensive experience allows us to navigate the complexities of insuring coastal properties with expertise and confidence.

One of our unique strengths is our substantial inland portfolio. This diverse portfolio helps balance out the volatility associated with coastal properties for our insurance partners. By distributing risk across a wide range of inland and non-coastal accounts, we stabilize our overall risk profile.

Our strategic approach involves placing multiple non-coastal accounts for each coastal property. This risk mitigation strategy enables us to offer competitive rates for coastal properties, making our coverage more accessible and affordable for businesses located in high-risk areas.

Contact us for quotes from top coastal insurers

Now that you’ve answered the question “What is commercial property insurance for coastal areas?,” it’s time to ask yourself what to do next. We understand that coastal property owners must navigate a complex landscape of high costs, limited options, and strict requirements. We can help you make an informed decision, ensure you have comprehensive coverage, and protect the business you’ve built. Contact us today so you’re prepared for tomorrow.

Austin Landes, CIC

About The Author: Austin Landes, CIC

Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.

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