Wrap-around options for coastal homeowners risks
Resource kit 31240
By Dan Corbin, CIC, CPCU, LUTC
In its Supplement I to Circular Letter No. 11 (1993), the New York State Insurance Department approved the use of three wrap-around options for coastal homeowners risks located within 2,500 feet of the shore. Each of these options involves purchasing a voluntary homeowners policy to supplement the dwelling policy offered by the New York Property Insurance Underwriting Association (NYPIUA).
The NYPIUA dwelling policy does not provide personal property coverage for the insured because it is solely provided by the wrap-around homeowners policy, regardless of option. The homeowners policy also provides all of the personal liability coverage.
While wrap-around policies usually have been written in the context of the New York Coastal Market Assistance Program (C-MAP), a company may issue a wrap-around policy without participating in C-MAP.
Dwelling policy Before analyzing the three wrap-around options, we need to understand what is being wrapped around. When homeowners purchase a residual market policy from NYPIUA, they are getting what might be called bare-bones protection—the Dwelling Property 1—Basic Form (DP 00 01 12 02) policy filed by the Insurance Services Office Inc. (ISO).
The ISO DP-1 policy written to include Extended Coverage perils insures a dwelling for the following eight perils:
fire and lightning;
windstorm and hail (not interior damage, unless the wind creates an opening);
riot and civil commotion (NYPIUA policies reference looting and pillaging);
aircraft and spacecraft;
vehicles (not owned or operated by the family);
smoke (including furnace puffbacks, but not fireplace smoke); and
volcanic eruption (this peril is not available on NYPIUA policies). Note: Damage from "puffbacks in peril No. 7 was not expressly covered prior to the Feb. 1, 2006, adoption by NYPIUA of the 2002 edition of the ISO DP-1 policy.
The peril of "vandalism or malicious mischief" (other than glass breakage) also may be insured, if this option is purchased. However, this peril is not available under wrap-around options No. 1 and No. 2 because the homeowners policy is expected to cover it.