Here’s the June Bulletin I sent out to my clients this month:
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It’s June on my calendar and the home buying and selling season is in full swing. It’s also the beginning of hurricane season in Florida, lasting through November. Hurricanes are one of the things that go with life on the coast, and people have devised numerous safeguards to deal with them. Here in St Petersburg, we’re relatively protected from the big storms, but we see our fair share of named storms.
How Hurricane Season can Affect Closings
In Florida, insurance companies typically cease writing new policies or binding quoted policies when a named storm appears off the coast. All purchases funded with a mortgage will require insurance, and since insurance costs are typically paid at closing, this means the closing can be delayed, because obviously lending can’t occur without insurance in place.
Why does this happen? Insurance companies suspend new policies during times of higher risk simply because the insurance business model doesn’t work if lots of people without insurance suddenly buy a policy right when a risk appears. It’s the year-round policyholders who keep insurance reserves afloat for when losses do occur.
Existing policies can be renewed during this time, so there’s no danger of a lapse in insurance coverage on any property. It’s just that transfer of property is made difficult because new policies or terms are required at this time.
Typically delays are no longer than a few days, but it’s important to know that during the summer season this “force majeure” wild card can enter the process.
Most insurers use the National Hurricane Center’s warnings and watches and suspend binding for the specific areas covered by the Center – which are very accurate. This way, unaffected areas are not needlessly impacted.
If a closing has to be delayed, agents will often amend the contract to agree on an extension, although the standard Florida real estate contract does contain a provision already for up to a 14-day extension if insurance becomes unavailable.
Sometimes, buyers who see this possibility looming may buy a full-premium policy ahead of the closing date just to be assured of no delays.
So, the moral of the story is to bind insurance as soon as possible. Remember the saying: “An ounce of prevention is worth a pound of cure”.
— Stephanie
