The Bahamas is no stranger to hurricanes as we are located in the hurricane belt. (In fact, as we edit this post, a Category 1 storm is heading in our direction.) As we brace for impact, we can’t help but to think of the tragedy that our brothers and sisters in the Northern Islands of The Bahamas endured last year with Hurricane Dorian, and the anxiety they may be facing now as another storm makes its way up the archipelago.
Hurricane Dorian highlighted the importance of having home insurance, as a news report stated that it was estimated that 17% of residents in The Bahamas found themselves homeless after the monster storm destroyed their homes. Currently, home insurance is not mandatory in The Bahamas. In February 2020, an executive of Bahamas First in an interview spoke of the importance of all homeowners having full catastrophic insurance coverage.
It is important to note that while some homeowners have insurance on their homes due to it being a requirement for receiving mortgage loans from banks, it does not necessarily protect you as a homeowner. (The Nassau Guardian). A news report in January 2020 stated that after Hurricane Dorian, many homeowners were unable to receive their insurance payouts due to the money going to banks for loan arrears. In this report, Gowon Bowe, a former chairman of the Bahamas Institute of Chartered Accountants, noted that it is important for one to be paying on their mortgage in order to avoid the bank becoming the owner of the property and receiving the payout from the insurance.
Is your home fully covered?
This article seeks to inform you of various insurance policies and clauses to assist you in ensuring that your house and possessions are adequately protected.
Homeowners’ insurance
Homeowners’ insurance covers the physical structure of the home itself as well as fixtures such as wardrobes (closets), bathtubs and fixed cupboards. Standard insurance policies cover your home against events such as fires, theft and falling trees (Insurance Management Bahamas). Including hurricane protection in your insurance policy is optional and will be at an additional cost. Most homeowners do not have hurricane coverage in their standard homeowners’ insurance policy. As a result, homeowners would not be protected if a hurricane leaves substantial damage to their home.
Comprehensive Insurance
CBMA Bahamas stated that comprehensive insurance includes catastrophe insurance which covers events such as hurricanes, tornadoes, floods, etc. While including catastrophe coverage in your insurance policy may be at a more expensive cost, living in a country prone to natural disasters, it is imperative to ensure that your home is protected against hurricanes. Charles Morris from CBMA Bahamas explained, “If your home is insured for a particular disaster, for example a fire and your home gets destroyed by a hurricane, you will not receive the insurance payout due to you not insuring for the type of catastrophe that occurred.”
Landlords
A landlord usually has homeowners’ insurance which protects the property itself. However, Mr. Morris from CBMA Bahamas suggested that landlords include in their insurance policy a clause that states that if something happens to the building, the insurance will cover the rent, i.e whatever the renters were paying the landlord as rent, the landlord will still receive that payment from their insurer for a specified period of time.
Important Insurance Clauses
Under-insurance condition, also known as Condition of Average: Insurance Management Bahamas stated that if the sum insured is inadequate, you will be unable to recover the full amount of your claim. Only the percentage that you have insured will be recoverable. If your home is worth $100,000 but you only insured it for $50,000, in the event something happens to your home you will not be entitled to the $100,000 your home is worth because it was under insured. There may also be penalties if your property is under-insured (JS Johnson).
Deductibles: If you are entitled to receive an insurance payout, any money you receive may be subject to a deductible. Deductibles apply to most losses that may be recoverable through insurance (Insurance Management). The amount that will be deducted will differ depending on your insurance provider and the reason for the loss. There are various deductible options to choose from when getting an insurance policy. For example, if your insurance policy includes a 15% deductible, this will result in a lower premium that you would be required to pay but note that any payout you receive will be reduced by 15%. However, most people keep a standard contract with a 2% deductible so that they do not have a large deduction from their insurance payout. (CBMA Bahamas)
Content Insurance
An important point to note is that home insurance does not protect the contents in the home. As such, in order to protect your contents, content insurance is required. Items that can be covered are furniture and appliances (Geico). Content insurance covers the items that are in the house, excluding things like vehicles, pets and money (Insurance Management Bahamas). Contents are protected from damage caused by events such as fire, theft or hurricane.
It is advised that you consider getting an appraisal of your contents to ensure that you receive equal value to replace the contents if they are destroyed by an event such as a hurricane. However, note that items such as furniture and appliances may depreciate yearly.
Renters
Content insurance is also important if you are renting. If you are currently residing in a rented property, it is important for you to know that your landlord’s insurance does not cover your possessions. Your landlord’s insurance will only cover the property itself but not the chattel inside the property.
It should be noted that some items are considered to be high risk items such as laptops and televisions (Insurance Management). Depending on the insurance provider you choose, special arrangements may need to be made if the cost of the high risk items are above a certain percent of the insurance sum.
Personal Possession Insurance
Items such as jewellery may not be covered by content insurance (Geico). This is where personal possession insurance comes in. This type of insurance covers items that are valuable to you such as clothes, cellphones, jewellery etc.
Hurricane Insurance Tips
In preparing for hurricanes, JS Johnson suggests:
- Locate your insurance policy.
- Review your insurance coverage.
- Ensure you have hurricane protection.
- Find out what the deductible is for hurricanes.
- Ensure that your contents are insured.
To read up on more hurricane preparedness tips, click here.
For a more detailed guidance regarding home insurance, click here.
Insurance policies are renewed every year so ensure that you are renewing your insurance and consistently paying on your insurance and mortgage so that in the event that a hurricane destroys your home, you can benefit from the insurance payout.
We hope this article was informative in assisting you to ensure that your house and possessions are adequately protected as we deal with another hurricane season.
As you prepare for the hurricane season, check out Putting Together the Perfect Hurricane Preparedness Kit
We pray that you and your family remain safe during Hurricane Isaias and for the remainder of the hurricane season.
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