Get ready for it. Whether you're just visiting Alabama's Gulf Coast, vacationing in a Gulf Shores condo for a week or looking to invest in a vacation rental property on the Gulf Coast, you'll be paying more - a lot more - for insurance.
Fewer and fewer companies remain in the market to sell Gulf Coast vacation property owners insurance for their condos or vacation homes. Those that do remain are charging much more to insure against storm damage.
With the prices of Gulf Shores real estate escalating as they are and the ever increasing demand from Alabama Gulf Coast vacationers the daily, weekly and monthly prices for vacation rentals is about to rise significantly.
Property insurance rates skyrocket along Baldwin beaches
ORANGE BEACH -- After months of post-Hurricane Ivan repairs and updates, owners of the Four Seasons of Romar Beach condominiums figured that their insurance premium would increase because the value of their two towers had doubled from $12 million to $24 million with the work.
But last month, when the Gulf-front complex renewed its casualty insurance policy, which covers wind damage from hurricanes, owners were stunned to see their annual premium soar from about $40,000 to nearly $1.1 million, said Robert Smith, president of the Four Seasons owners association.
The increase means additional expenses of nearly $15,000 a year for owners of each of the 71 condos.
Across the country, storm-weary traditional insurers are backing out of coastal markets, often leaving only reinsurers -- hard-hit themselves after 2005's devastating hurricane season -- and state-sponsored insurers of last resort. The lack of competition, paired with the need of reinsurance syndicates and state-sanctioned insurers to reload their coffers quickly, has forced coastal insurance prices into unheard-of realms this year.
Just west down the beach from the Four Seasons, owners of the 35-unit Romar Tower saw their annual premium escalate last month from about $35,000 to more than $424,000.
"It was a complete shock to us," said owners association President Maynard Hellbusch. "If we didn't have some people with mortgages in this building, we probably wouldn't have insurance."
Lenders usually require homeowners to buy insurance as part of their mortgages, though those who have fully paid for their property may choose not to insure and pay for damage from their own pockets.
"We have red flags everywhere saying, 'We have got to figure this out,'" Orange Beach City Councilwoman Tracy Holiday said recently after hearing Smith explain the Four Seasons situation to municipal leaders. "We've got to have this at the forefront because we have got to solve this: Our economic lifeblood is dependent on issues like this."
Smith said in a recent interview that he wrote a letter to Alabama Insurance Commissioner Walter Bell asking whether Four Seasons' 27-fold premium increase was within the law. "It doesn't sound legal," Smith said.
Unlike traditional insurers, who usually must get approval from the state Insurance Department to raise rates, reinsurers do not have to answer to Alabama regulators, according to department officials. Reinsurers -- the large, typically international, syndicates that back insurance companies like State Farm or Nationwide -- also often invest in risks, such as multimillion-dollar Gulf-front condos, that mainstream insurers deem too precarious. Read more