Across the Carolinas, the conversation about property insurance has centered on cost, and for understandable reasons. Premiums have climbed sharply, insurers have asked for steep increases that regulators have negotiated downward, and some policyholders have faced non-renewal. Yet for a business owner or a community association board, the costlier surprise is often not the premium.
It is the discovery, in the days after a storm, that the policy everyone is counting on does not reach the loss sitting in front of them. Recent seasons have made the point a vivid reality for many policyholders in the Carolinas. Helene carried catastrophic flooding deep into western North Carolina and across the upstate of South Carolina, while the coastlines of both states remain exposed to wind, storm surge, and the flooding that follows a tropical system.
Wind Is Covered, Water Often Is Not
One of the most common gaps is the line between wind and water. Most homeowners, dwelling, and commercial property policies cover damage from wind and named storms but exclude flood, which has to be insured separately through the National Flood Insurance Program or a limited private market.
In the areas Helene struck hardest, only a small fraction of properties carried flood coverage, and where that coverage did exist, it was necessarily capped for both structure and contents and often at levels well below the sustained losses. When wind and water both contribute to a single loss, the way the damage is characterized can decide the entire claim.
North Carolina recognizes that more than one cause can combine to produce a loss, yet its courts will enforce policy language that withholds coverage whenever an excluded cause such as flood plays a part, regardless of what else contributed. That puts a premium on the insured’s documentation and often on the insured procuring costly engineering evidence about what actually caused the damage.
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Business Interruption and Civil Authority Coverage
For a business, physical damage is only part of the exposure. Business interruption coverage is meant to replace income lost when a covered event halts operations, and many commercial policies extend it to losses caused by an order of civil authority, such as an evacuation or a road closure that blocks access to the premises.
Recovering those losses is rarely automatic. Insurers and policyholders often disagree about how to measure income that would have been earned had the storm not struck, especially when a disaster reshapes the local economy for months afterward. A company that already understands how its policy defines the covered period, the waiting period, and the trigger for civil-authority coverage stands on far firmer ground than one reading those terms for the first time in the middle of a claim.
The Master Policy and the Gap Beneath It
Community associations face a parallel set of surprises, and they begin with the master policy. Whether the association insures the interiors of units or only the structure to the studs depends on the governing documents, and the seam between the master policy and an owner’s individual policy is exactly where coverage tends to slip.
Two gaps recur. The first is the deductible. Carriers increasingly apply percentage deductibles for wind and hail, sometimes a specific percentage of the insured value, which on a large building can translate into a six-figure amount that the association must absorb before coverage responds.
When that figure outstrips the reserves, the board may levy a loss assessment that spreads the shortfall across every owner, and many owners carry only a small amount of loss-assessment coverage on their own policies, well below the share they could be asked to pay. The second is the cost of rebuilding to current code.
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A standard policy may pay only to restore what was there before or may afford a relatively low sublimit for ordinance or law coverage. In these situations, an older building damaged in a storm can face substantial upgrade costs that fall outside the available coverage unless the association has added ordinance or law protection.
Given the complexities and potential gaps in coverage, businesses and community associations must review their policies carefully and consider seeking the advice of a broker who specializes in their type of coverage. By doing so, they can better understand their risks and ensure they have the necessary protection in place.
As the Carolinas continue to face the threat of storms, policyholders must be proactive in assessing their coverage and addressing any gaps that may exist. This includes understanding the specifics of their policies, including what is covered and what is not, as well as being aware of any changes in the law or regulations that may impact their coverage, such as those related to foreign influence risks.
Ultimately, the key to minimizing the financial impact of a storm is to be prepared and to have a clear understanding of the coverage in place. By taking the time to review policies and address any potential gaps, businesses and community associations can help ensure they are protected in the event of a disaster.
