The complexities of insurance in the “Aloha State”
Every state has different policies and coverage exclusions when it comes to home insurance and coverage isn’t generalizable from one location to another. Both the natural and man-made landscapes in Hawaii, although beautiful, can bring unique challenges to the insurance coverage. Hawaiian property may include single family dwellings, townhomes or condos and multi-unit buildings. Each structure is insured with three different types of coverage: Homeowners, Renters and Dwelling Fire/Landlord.
Homeowners: you own and use the property the majority of the time.
Renters: you do not own the property but live in it most of the time.
Dwelling Fire/Landlord: you own the property but rent it out the majority of the time.
The beautiful landscapes of Hawaii bring their own unique challenges from volcanoes to the oceans to the prevalence of tourists in the state. The following challenges increase risk of peril or losses:
Flooding – rivers and oceans
Vacation rental (Airbnb) usage
Construction style – single wall and double wall
Cost & Natural Disasters
Home insurance in Hawaii is typically more expensive due to higher cost of building materials, higher prevalence of natural disasters and weather-related wear and tear on structures. In Hawaii, a large bulk of your property insurance coverage will likely be hurricane insurance.
Home insurance does not automatically cover all losses or disasters. If you do not see a potential peril (hurricane, earthquake, flood) specifically outlined in your home insurance policy, it is likely not covered. It’s important to review and confirm with your insurance agent that all the risks you would like covered are included in your policy.
Alternatively, your home lender may not require you to have a policy that covers earthquake or lava flow damage, but that does not mean you are at any less of a risk for those perils. When purchasing property insurance in Hawaii, it is vital to check the financial rating of the insurance company. This ensures there will be money to pay out the losses when/if a major catastrophe hits. A.M. Best is a popular financial rating firm, and you preferably want to look for a rating of A or A-.
Is Your Property’s Risk Too High?
If your Hawaiian property is higher than the average risk, traditional insurance companies may not be able to offer you coverage. To ensure property coverage for high-risk properties, Hawaii uses an association of last resort called, “Hawaii Property Insurance Assocation.” A HPIA policy should only be purchased if you have been declined by two or more insurance companies, as HPIA policies are more expensive and have more exclusions compared to policies from traditional insurance policies.
Choosing the Right Home Insurance
The best way to shop for home insurance in the Aloha State is to work with an independent insurance agent to make sure you are offered multiple options from different companies. Independent agents have the distinctive ability to shop around between companies, ensuring their loyalty is to their client and not a specific carrier. In a state as unique as Hawaii, having multiple options from different companies can make all the difference in both price and coverage.