What Is Coastal Home Insurance, and Who Needs It?

Many people dream of owning a coastal home near the water. But the benefits of that scenic location come with the heightened risk that your home will suffer storm damage or flooding.

Your home’s inherent vulnerability means you’ll need more comprehensive home insurance coverage to fully protect your investment. But that coverage can be hard to find because not all insurance companies write policies for homes located along the coast.

Here’s what you need to know about coastal insurance.

Standard home insurance vs. coastal home insurance

The term “coastal home insurance” refers to a more robust coverage than standard homeowners policies offer — like flood insurance, for example.^[1] Special deductibles for named storms also generally affect coastal homes more than they affect inland homes.

Many insurers cover both inland homes and coastal homes. But some avoid insuring homes located within a certain distance of the water.^[2] That’s why it’s vital you read the fine print when comparing insurers.

Additional coverages for coastal homes

When it comes to protecting your investment in your home, the liability and personal property coverage you get from standard homeowners insurance is a good start, but you might need to add supplemental coverage.

Below are a collection of coverages you may want to consider.

Flood insurance

Homeowners insurance doesn’t cover flooding, but you can purchase it through the National Flood Insurance Program (NFIP), which the Federal Emergency Management Agency (FEMA) manages.^[3] More than 50 private insurance companies sell NFIP policies, and you can also buy one directly from the program page on the FEMA website.

About 23,000 communities participate in the program. Flood insurance is optional if you own your home outright, but you’ll have to have it if you’re in a high-risk area and you finance your home with a government-backed mortgage.

Windstorm insurance

Windstorm insurance — also known as hurricane insurance — typically includes hail coverage as well. Standard homeowners insurance policies usually cover damage from windstorms and hail, but some insurers exclude these perils for properties located on the coast. In other cases, insurers that cover such damage might limit claim amounts.

Like flood insurance, windstorm insurance is optional if you own your home outright. But if you finance the purchase of a coastal home, your lender will probably require that you have it if your standard policy has any wind-related exclusions for catastrophic events, such as hurricanes and tornadoes.

Replacement cost coverage

Homeowners policies typically pay either the actual cash value (ACV) or replacement cost for insured losses. ACV accounts for depreciation in your claims payout amount. Replacement cost doesn’t account for depreciation and pays you what it would cost to rebuild the physical structure of your home. But for coastal homes, standard replacement cost may not be enough.

Coastal homeowners should also consider extended replacement cost or guaranteed replacement cost coverages. Extended replacement cost usually pays between 125% and 200% of your dwelling coverage limit. Guaranteed replacement cost coverage means your insurer will cover the full cost of rebuilding your home, even if it exceeds your dwelling coverage limits.

Both extended and guaranteed replacement cost coverages will increase the cost of your home insurance policy.

Cost of home insurance in coastal cities

Because of the added risks involved, homes in coastal areas can be significantly more expensive to insure than homes located in inland cities.

The following table shows median annual premiums for a number of coastal U.S. cities.

As you can see, insurance rates vary drastically from one coastal city to the next. They also vary dramatically within a particular state.

Rates in Corpus Christi, Texas, for example, are well above the state average of $3,969 for $300,000 in dwelling coverage. In Virginia Beach, you’ll pay nearly $700 per year more than the Virginia state average.

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Government assistance for coastal home insurance

Finding insurance for coastal homes can be difficult, and many states have implemented solutions for homeowners unable to find an insurance company willing to insure their homes. These solutions are called Fair Access to Insurance Requirements (FAIR) plans.

All FAIR plans cover fire, vandalism, riots, and windstorms, according to the Insurance Information Institute (Triple-I). Georgia and New York FAIR plans also provide wind and hail insurance to eligible homeowners in coastal communities.

Beach and windstorm plans serve a similar purpose. These insurance products are available in seven states along the Atlantic and Gulf coasts and cover hurricanes and other windstorms. Some plans also cover fire damage.

These plans typically cost more than private insurance, and they usually provide more narrow coverage than traditional plans. But such plans play a vital role for homeowners who can’t find coverage elsewhere.

Coastal states with FAIR and/or beach and windstorm plans include:

• California

• New York 

• Georgia

• Florida

• Mississippi

• South Carolina

• Texas

• Alabama

• North Carolina

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Deductibles for coastal home insurance

Your policy’s deductible represents the amount of an insurance claim you’re responsible for paying. The deductible is typically a flat dollar amount, such as $500 or $1,000, and you’ll be responsible for paying this amount before your insurer provides coverage.

Special deductibles sometimes apply to claims for damage caused by hurricanes and other named storms. For example, hurricane deductibles apply only to storms categorized as hurricanes by the National Weather Service or U.S. National Hurricane Center. Named storm deductibles, on the other hand, can apply to any named storm, including tropical storms, topical typhoons, and typhoons.

Nineteen states, including non-coastal Pennsylvania and the District of Columbia, have hurricane or named-storm deductibles.

Some states also have windstorm and hail deductibles that also require a triggering event to take effect.

Coastal home insurance FAQs