Transaction reminder: If a hurricane threatens Fla., property insurers won’t issue new policies, so lenders won’t issue new loans. But the rules vary by insurer.
ORLANDO, Fla. – Hurricane Elsa is the first 2021 storm to possibly hit Florida, but it doesn’t have to make landfall to impact real estate transactions scheduled to close soon. For most property insurance companies, new policy issuance shuts down after the National Hurricane Center (NHC) issues a hurricane warning or watch.
If a storm is imminent, all property insurers shut down. However, each one has internal rules on when they will/will not issue a policy. And the triggers for coverage suspensions differ for private insurance companies and state-run Citizens Property Insurance Corp.
Most private insurance companies rely on the NHC’s issuance of tropical storm or hurricane watches or warnings, and they suspend writing new policies or allowing people to purchase additional coverage only in those areas of the state impacted by the watch or warning. This means restrictions only in certain geographical areas of the state.
Citizens Property Insurance, however, suspends writing coverage throughout the state when a storm threatens any part of Florida. A transaction closing in Miami, for example, could be impacted by a hurricane threatening Pensacola.
Insurance companies have stopped issuing policies during hurricane threats for a long time in order to keep skittish homeowners from adding coverage a few hours before a storm makes landfall near their home.
The rule only impacts new polices, though. Homeowners who already have coverage don’t need to worry. However, that’s also the reason hurricane preparation guides advise reviewing insurance policies at the beginning of the hurricane season. Homeowners might not obtain necessary coverage if they wait.
Hurricane watch versus a hurricane warning:
- A hurricane watch means conditions are right for dangerous weather. It means “watch out” for events that could come and go quickly, such as a tornado or thunderstorm, and for tropical weather that is not yet a threat. It means be ready to act.
- A hurricane warning means dangerous weather is on the doorstep. A warning means it’s time to evacuate or move to shelter.
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