Hurricane Irene poses test for insurance plan

Heavy surf caused by Hurricane Earl crashes on shore in front of beach houses and a restaurant on the Nags Head Pier September 2, 2010 in Nags Head, N.C.

Stacey Vanek-Smith: Hurricane Irene is making a b-line for North Carolina. The storm is set to hit the coast Saturday. It could pose the first big test for North Carolina's coastal insurance plan since it was reformed in 2009. Officials say they can pay for up to $4 billion in damages; after that, it's all on the homeowners.

Marketplace's Adriene Hill has more.

Adriene Hill: Many homes and businesses on the North Carolina coast are covered by what's known as the "Beach Plan." It's insurance of last resort for people who can't otherwise get coverage on their properties. The Beach Plan has about $70 billion in exposure. It has access to about $4 billion to pay out damages.

Wayne Goodwin is the North Carolina insurance commissioner.

Wayne Goodwin: You may wonder, well if there's $70 billion in exposure, is $4 billion enough?

Yeah, I wondered that.

Goodwin: Well it would be because it is extremely unlikely that any single major storm or series of storms would devastate all of the exposures on the coast.

But if a storm did cause more than $4 billion dollars in damages? Under North Carolina law, homeowners across the state could be asked to pony up -- paying as much as 10 percent more for their property insurance.

David Marlett: Then mine and my neighbors and people in the rest of the state could have a 10 percent surcharge each year until that amount is paid off.

David Marlett is a professor at Appalachian State University, about five hours from the coast. He says adequately insuring beach properties is a struggle for all coastal states -- some plans are better funded, and better thought-out than others.

Hill: What kind of shape is North Carolina's plan in?

Marlett: I would say compared to other states, it's pretty good.

Yes, Irene's track is ominous, but Marlett doesn't think it looks like the kind of storm that would overwhelm the $4 billion pool.

Marlett: And let's hope it doesn't get that bad.

I'm Adriene Hill for Marketplace.

About the author

Adriene Hill is a senior multimedia reporter for the Marketplace sustainability desk, with a focus on consumer issues and the individual relationship to sustainability and the environment.
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What about the renters out there? I hadn't really thought about this until we did a post recently at Mango Money about renter's insurance (http://www.mangomoney.com/blog/trends/why-you-need-renters-insurance)... Apparently, almost no renters insurance covers natural disasters like hurricanes, no matter where you're located. I think Donald (below) is right though. As much as it might inconvenience beach-dwellers to find a private insurance company, it would inconvenience the rest of the state much more to have higher rates, should a storm strike that causes more damage than the $4 billion covered.

As a NC homeowner whose house is hundreds of miles from the coast, which was filling up with megamansions virtually at waves' edge through the housing boom of the last decade, I resent being asked to possibly pay higher rates because of these beachdwellers. If they can't find a private insurance company to take the risk, why should I? So much state money is already being spent to give them roads and other services, why should we also support the private homeowners in their risk? Really what we need is stricter zoning and coastal protection laws, but since so many realtors and attorneys are in our Legislature, development is king in our state.

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