Purchasing Coastal Real Estate - pg. 4
What are the limitations of flood insurance?
Federal flood insurance covers only structural damage-including damage from waves-caused by flooding. As a rule, damage caused by chronic, long-term erosion is not covered. However, since most erosion that causes structural damage is associated with coastal storms, coverage is often available.
Furthermore, a federally-backed flood insurance policy covers only damage to the insured structure. It does not cover damage to land caused by flood, wave or erosion. And, it does not cover damage from other events, such as hurricane-related winds. These same limitations may apply to privately underwritten insurance.
When a structure is so badly damaged that it cannot be repaired or rebuilt, an owner may receive all benefits under the flood insurance policy and discover the coverage is inadequate to cover the cost of removing the structure and/or repaying the loan. In addition, the value of any remaining land may decline significantly if the land is declared "unbuildable."
Many privately underwritten homeowner policies cover wind damage and water damage caused by wind; e.g. wind damage to a roof resulting in leaks. However, because of the high risk in coastal areas, some private insurance companies are excluding coverage for wind damage. For that reason, the N.C. Department of Insurance has established an insurance pool known as the "Beach Plan" to provide wind coverage in areas where it is not otherwise available.
[For more information about the Beach Plan or homeowner's policy coverage, contact your insurance agent or the N.C. Department of Insurance.]
It depends upon the extent of the damage. If damage is less than 50 percent of the building's value, you may be able to repair it at its original location. But if the building is more than 50 percent damaged, repairs are considered substantial and must meet both new setback requirements and other new building code requirements. Rebuilding is prohibited if erosion has left insufficient space on the lot to construct landward of the setback.