A hypotheitcal question on insurance. (lender, new home, buying)

[1freespirit]

Aloha,

I was wondering why is it so hard and so expensive to get insurance in Lava Zone 2 or even 1 for that matter.

Yes I know that the lava flow COULD come close and burn the house down. Even though some parts it has not happened in over 100 years and still is in lava zone 2. But what about all the people who live in tornado alley on the mainland? I used to live there and insurance was not any higher or special rated because of such. Chances of a tornado hitting and either damaging your home or totally destroying it (in tornado alley areas) Midwest USA. I woudl say on an average tornado season (4-6 week period maybe longer) you would receive about 10-15 possible chances of tornados touching down in your area or close by - And this is each and every year.

Guess I just can't comprehend the difference.. Hawaii really has no tornado's and lava well I guess there is a possibilty yes it could happen in the next year or in a few years or a 100 years or maybe never. In Mainland tornado alley areas chances of tonados is very high many times throughout the year, and even though maybe not a full tornado.. the high winds are always damamging homes in one way or another in areas every year. There almost isn't any area where a tornado has never touched down at one point or time in the last 100 years.

Any comments on the why this would be different? Is it because in lava zone 2 there is more of a chance of your house catching on fire then living in tornado alley where each year the threat is extremely high that your house is going to get hit and leveled or damaged by a tornado or a violent lighting storm?

I can't help having an inquisitive mind - sorry! I do it all the time..

[Dreaming of Hawaii]

my guess is that the insurance companies aren't comparing a volcano in Hawaii with any other kind of weather phenomenon anywhere else. The fact is that the islands were created by volcanoes, and volcanoes continue to erupt. No-one can predict where or when the next eruption will be, but they certainly have pretty good information on past performance for predicting hazard zones.

We also have hurricane insurance on our house on the BI. Have very many hurricanes hit there? No, but we are on very small rock in the middle of a very large ocean, and hurricanes could very well strike at any time.

I certainly buy whatever insurance they tell me to. Better safe than sorry!

[PacificFlights]

If you don't think lava is going to be an issue, don't get the insurance. I don't think anyone can force you to cover yourself for a risk if you don't want coverage for that risk. Now your lender may demand it as a condition of giving you money. Thats them wanting it to protect their investment in your property.

[1freespirit]

Yeah I agree with you both.. just thought I would throw out a hypothetical question.

Amazingly enough if you search around with various Insurance companies the rates can differ upwards to $1,000 more per year with the same type coverage.

I think I found the carrier we are going to go with and am satisfied with the premium. The first company I ever contact was the real high one that totally scarde me.

All is fine now..

Thank you all so much!

I enjoy this board and it has been a great help and confort to me.

Mahalo!

[mdand3boys]

There's always Lloyd's of London for really, scary pricing!
The problem is that after Hawaiian Gardens subdivision got wiped clean, it really scared the insurance industry and most carriers got out of the business as their underwriters didn't understand the real lay of the land. My own thought is that Nanawale is probably much safer than the Zone 2 suggests.

[PacificFlights]

I quess part of it is knowing what the insurance pays for if lava destroys your home. Unlike a tornado or hurricane, you may not be able to rebuild for months, years or decades. If the insurance co has to foot bills until you rebuild, have a new place, or pay for a new place, that cost a whole bunch more than a couple months of temporary housing and construction, so the rates are higher. If they end up buying you a new home, they are left holding the bag of hot useless moonscape until that property can be unloaded and unloaded at a lost. That cost some heavy money which your premium is paying.

[hotzcatz]

I would suspect lava insurance is more expensive because when it hits, it eats up more than one house. After Iniki wiped out Kauai, some of the insurance companies went out of business instead of paying their customers since they didn't have enough money to cover the amount of claims. Same way with lava as opposed to a house fire, if one house burns, the rest of the premiums cover the repayment of the policy, if lava eats the whole sub-division such as happened in Royal Gardens, Kapoho, Kalapana, etc., then the insurance company would be put out of business if they covered very many homes in the path of the lava flow. So, I'm guessing that's why the premiums are higher. Either that, or just because they can charge more so they do.

[1freespirit]

As a matter of fact during searching and calling various insurance companies. I found a few that will insure in Lava Zone 2 at a very reasonable price with hurricane included. (maybe even lava zone 1 - I did not ask about that lava zone as Nanawale is is zone 2 but they still may cover.)

The preimums quoted me is lower then my home insruance here is Idaho - so am VERY pleased and impressed.

If anyone would like the names of these two insurance companies that were over $1,000 less per year then the others I checked on please let me know I would be happy to send you to them.

Aloha,

[MannixM]

I am finally returning to the Big Island!
I'm scheduled to close escrow 10/20/09 on a beautiful house in Kalapana Sea View Estates.
But I just received the quote for Lava Zone 2 insurance. Based on appraisal for 198k replacement, Zephyr Insurance is asking $2,308 per year! This plus HPIA hurricane insurance for $276 per year! I'm thinking of killing the deal!
My previous homes in Keauhou and North Kohala were nothing like this!
You offered to give the names of insurance companies you researched.
Will you please help me out! I probably don't have time to change companies before closing deadline, but $200 bucks a month for insurance just spins my guts!
Mahalo!

[FloridaKash]

Also you have to remember most Insurance (Hurricane, Tornado, Fire, Earthquake, Flood) does not replace the land if something happens to your home. I would imagine with Lava insurance it would include the value of your land since you would not be able to rebuild there.


~Kash