Make sure the OBX home you are purchasing has the insurance coverages that will actually protect you from big losses in the event of a disaster. I refer clients to insurance agents almost weekly and often I see premiums that cause me to ask - "how is this possible??"
I own a modest 4BR 2800sf primary home here on the OBX and am not located in a Floodzone - My HO3 Homeowners Policy and WInd Policy cost nearly $4200 per year - so when I came across an insurance quote for a 4800sf home located in a flood zone for $4800 per year - it raised my eye brow just a bit. I called my agent asking if I was paying too much and indicated that I saw a quote from a Big insurance Company that seemed almost too low for the size and location of a property I was selling.
I found that some Insurance Companies can not write an HO3 Policy for an Outer Banks home - and that they can only write a DP2 (Dwelling Policy) which is far less protective than the HO3 and cheaper. I dont sell insurance and it can be confusing - so I always defer to an insurance expert for the answers. I am not writing this to bash insurance companies - I merely want to assure that any purchaser has all the info up front so there are no bad surprises later on.
Bo Rhodes, an agent with Bankers Insurance on the Outer Banks, says "What needs to be emphasized is that if the cause of loss is not one of the specially named perils in the DP2 fire policy, the loss is not covered. Basically, it is very limited. You can buy peril coverage by endorsement, but it can't buy the comprehensive coverage you get with the HO3 homeowners policy. Below are just some of additional coverages the homeowners policy (HO3) offers that the fire policy (DP2) does not:
1) 25% additional dwelling coverage limit
2) Ordinance and law coverage
3) Water Backup
4) Wind Driven Rain- most frequent type of loss we experience on the OBX
5). The separate crime policy offered only covers him if their is a physical breakin. If the tenants, cleaners, pool boy, house is unlocked & someone just walks in or any person that may have had access and still has the key the items they steal are not covered because no one physically broke into the home. We have seen may problems with cleaners going back into the homes and stealing electronics during the offseason and its not covered under the Fire Policy or its separate policy.
Bo explains that "some Companies can’t write a Homeowners policy on the Outer Banks when there is rental exposure. The rest of us can. They use what is equivalent to the State Risk Pool system, NCIUA (North Carolina Insurance Underwriters Association), because they have no other alternative. Some Big Companies quit writing their own insurance policies through about 6+ years ago and nonrenewed the policies they already had. All the other agencies on the OBX can write a homeowners policy (HO3) because we have more options other than the State Pool System."
Bottom Line: ask questions and make sure you know your options. There is Price and there is Cost. While the premiums for an HO3 policy may be a higher PRICE than the DP2 Dwelling Fire Policy, you could save thousands of dollars in the future should you suffer a huge loss on your precisous Outer Banks Home; therefore the COST will be less.