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Long Island Weekly Desk; SECT14LI
Storm Warning on Home InsuranceFront
By JOHN RATHER1,060 words26 September 2004The New York Times Late Edition - Final8English(c) 2004 New York Times Company
HOME insurers are facing damage claims that may run into the billions inhurricane-wracked Florida, but
insurance
experts and regulators said last weekthat home
insurance
premiums and wind deductibles on hurricane-prone LongIsland would be unaffected, at least for the foreseeable future.But they also said waves of home improvements -- often not reported to insurersby homeowners -- and construction replacement costs far above nationalaverages, particularly on eastern Long Island, were leaving many Long Islandhomeowners precariously underinsured, and in some cases unaware that theirpolicies place caps on replacement coverage that might fall short of actual costs.The caps and the introduction of windstorm deductibles are a legacy of 
insurance
 industry reaction to Hurricane Andrew in 1992. Andrew, a Category 5 hurricane,inflicted heavy losses on insurers in Florida and hastened a nationwide shift awayfrom homeowner policies that guaranteed home replacement no matter what thecost.Now, homes on Long Island and elsewhere in the state are more likely to becovered by so-called extended replacement policies that generally cap replacementcoverage at 20 to 25 percent above the overall limit listed in the policy, the state's
Insurance
Department said.Coverage is further restricted by windstorm deductibles based on hurricane andstorm damage risk estimates that the industry devised after Andrew for LongIsland and other hurricane- and windstorm-prone areas along the East Coast. Thedeductibles typically require a homeowner to pay thousands of dollars for repairsor replacement before coverage begins. In New York, the deductible is 2 to 5percent of the amount for which a dwelling is insured.With no major hurricane striking Long Island since Andrew hit Florida, thewindstorm deductibles that New York State permitted to prevent
insurance
 companies from abandoning the state market have yet to be tested. Insurerswould need permission from the state
insurance
department to increase thedeductibles for all customers.In the meantime, the escalating cost of home replacement and its tendency tooutpace coverage is gaining attention in Nassau and Suffolk, and the state
 
insurance
department is advising homeowners to review their policies to ensuretheir coverage will meet their expectations.The gap between what a house is insured for and the actual cost of replacementtends to be widest for homeowners who have lived in the same house long enoughto pay down mortgage principal while carrying out home improvements, expertson the Long Island market said.''People frequently find themselves underinsured even if they started off properlyinsured,'' said Robert P. Hartwig, the chief economist for the
Insurance
 Information Institute, a trade group in New York. ''And that's been particularly thecase with the boom in home equity. People have put large amounts of money intotheir homes in recent years, and if you don't call your insurer, the insurer has noway of knowing it.''In real estate closings, mortgage holders insist that homes be insured to theiractual value to protect loans. Thereafter, policies typically contain what theindustry calls inflation guards that increase premiums 3 to 5 percent annually. Butthe safeguards are often outstripped by higher replacement costs on Long Island,particularly when there are extensive home improvements.''There was a day 15 years ago when you could drive by a house, snap a photoand as long as you knew the square footage you could have a pretty good idea of the replacement cost within a certain range,'' said Timothy L.
Brenneman
, anexecutive vice president for Cook, Hall & Hyde, an
insurance
agency in EastHampton with offices in Bethpage and Plainview. ''Today there are so manyvariables, from what the cost of replacement is for granite counter tops andinternal woodworking to the size and complexity of windows.''In recent years, a combination of low interest rates on loans and soaring homeequity reflecting major increases in home values enticed many homeowners toundertake improvements. In older areas of Nassau as well as in western Suffolk,many homes have become expanded and upgraded versions of what they wereoriginally.But if they are damaged or destroyed by wind or fire, these altered homes aredifficult and expensive to duplicate, experts said, and they are also in a regionwhere replacement costs are at least 25 percent higher than the national average.An upward surge in the cost of building materials and the expense of meetingmore demanding building codes add even more to the cost, they said.Robert Wieboldt, executive director of the Long Island Builders Institute, a tradegroup in Islandia, said higher construction and rebuilding costs on eastern LongIsland were in part a result of state codes requiring homes be able to withstandwinds in excess of 120 miles an hour, higher than the 110-m.p.h. requirement forthe rest of Long Island.''On a typical East End new home, it's $25,000 more than before for windows andglazing,'' he said. The higher standards also apply to replacement homes.
Insurance
agents who quiz customers closely to determine their level of need forhome
insurance
walk a fine line, Mr.
Brenneman
said. ''You don't want to beperceived as trying to sell something every time they call you,'' he said. ''But on
of 00

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