Posted on: Wednesday, January 5, 2005
Island homes 'underinsured'
By Deborah Adamson
Advertiser Staff Writer
The tsunami that devastated parts of South Asia has raised concerns among Hawai'i residents about the need for preparation in the Islands, including insurance coverage.
Tsunamis happen infrequently in Hawai'i — the last significant one occurred in 1975. So is it worth the cost to insure against it?
"We encourage everyone to be adequately insured," said Butch Kinerney, of the Federal Emergency Management Agency in Washington. "Get the amount of coverage (based on what) you can afford or the amount of damage you can sustain."
While state and federal governments would offer financial help if a tsunami hits, most would be in the form of low-interest loans, said Ed Teixeira, vice director of Civil Defense at the Hawai'i Department of Defense.
The state does appropriate money for its major disaster fund, but it pays for the cost of sending out crews in a disaster. Money doesn't go directly to homeowners or businesses.
"Basically, you're on your own," Teixeira said.
And your homeowner's insurance policy won't save you. It may pay for some types of water damage, but will not cover tsunami flood damage, said Carolyn Fujioka, a spokeswoman for State Farm Insurance in Honolulu.
Damage from a tsunami is covered by separate flood insurance, which is purchased through FEMA's National Flood Insurance Program. The federal program was created in 1968 when insurers balked at being exposed to flood risks.
Homeowners living in areas at high risk for floods — both tsunami and flood zones — are required by their mortgage lenders to buy flood insurance, according to FEMA. Tsunami zones are areas along Hawai'i's coasts, while flood zones also include properties near streams and in valleys, Teixeira said.
No more than 10 percent of the state's more than 470,000 housing units are insured for flood damage, according to the U.S. Census and FEMA.
"No question, we're underinsured. Look at the amount of damages" incurred, said Ken Garner, a Honolulu-based insurance agent who sells flood insurance. "Nobody thinks it's going to happen to them."
Mike Onofrietti is one such uninsured homeowner. He lives on a hillside in Kailua and he doesn't see much of a risk from tsunamis. But he's concerned about heavy rain causing a landslide.
"I've been toying around with the idea for a year," he said. "There are flood issues that can occur in any neighborhood."
While a tsunami occurs once every 20 to 30 years in Hawai'i, floods hit much more frequently, according to FEMA.
Over a 30-year mortgage, homeowners have a 26 percent chance of suffering flood damage to their homes; the likelihood of experiencing fire damage is only 4 percent, according to the National Flood Insurance Program.
Homeowners planning to get flood insurance should take out enough coverage to replace their homes and their contents, said Janet Bamford, author of "Smarter Insurance Solutions."
"To do anything else is to assume the risk yourself," she said.
Flood insurance through the federal National Flood Insurance Program covers up to $250,000 in damages to a residential structure and up to $100,000 for contents. For businesses, the coverage is $500,000 each for the structure and contents.
The premium would depend on where your home or business structure is, Garner said. A homeowner can expect to pay several hundred dollars per year for the $250,000 maximum coverage offered through the federal program, while a business could pay several thousand dollars for the maximum $500,000 coverage.
If you're in a condo, your condo association typically purchases flood insurance for owners. The cost may be included in your maintenance fee.
While Hawai'i's median home prices soar above the maximum coverage of $250,000, much of the value lies in the land and not the structure, said Paula Kalima, a compliance officer in the residential lending unit of First Hawaiian Bank.
"Most homes can be rebuilt for $250,000," she said.
First Hawaiian Bank, Bank of Hawaii and other lenders require borrowers who live in high-risk areas to have flood insurance up to $250,000.
Homeowners can buy supplemental flood insurance to augment the basic policy, said Steve Tabussi, vice president of customer solutions at First Insurance. The insurer, with 9,000 flood policies in Hawai'i, is a partner of the national flood program along with State Farm.
The owner of a $700,000 home near in Kona paid $425 a year for maximum flood insurance coverage through the national program, Tabussi said. Additional coverage of $400,000 in supplemental flood insurance raised the premium to $1,425 a year.
A $3.2 million building on Nimitz Highway in Honolulu came with yearly premiums of nearly $7,400 for $500,000 in coverage for the building and $500,000 for the contents, Garner said. Supplemental insurance coverage of $1.6 million will boost the premium to more than $10,500 a year.
To see what flood zone you're in, on O'ahu call 523-4131 or go online to gis.hicentral.com/website/parcelzoning/viewer.htm. Click on "search" and enter your street address or tax map-key number. For the Big Island, call 961-8327; Maui, 270-7253; and Kaua'i, 241-6619.
Flood policies, which have 30-day waiting periods before they kick in, are sold through partner insurance companies. For a list of flood program partners, go to www.fema.gov/nfipinsurance/companies.jsp. To find an agent, call toll-free (888) 724-6924. For information on the national program, go to www.floodsmart.gov.
Complaints have been filed against some insurers. In May, a class-action lawsuit was filed on behalf of Hurricane Isabel victims against State Farm, Omaha Property and Casualty, Travelers, USAA, Selective Insurance Company of the Southeast, Indemnity Insurance Company of North America and Harleysville Mutual. The lawsuit alleged that the insurers delayed in paying or failed to pay flood policyholders what they were entitled.
Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.
