Insurance - Do Most Carry it?

As I understand it the higher you are in elevation the higher the velosity of the wind. I got a ball park estimate on windstorm insurance based on my plans and the quote was @ $ 2-400 per month. I decided that I could buy a lot of rebar and concrete for that kind of $ so I overbuilt. I took great care in anchoring the roof down, used poured concrete, no overhangs and am in the process of building shutters.
I'll still get fire, liability and earthmovement

Bombi.

I did some digging on the net since I opened the topic. I talked to a rep from First Insurance at SunnyIsland ss. I got a quote for wind / storm / flood of about 6k per year for a 300k structure. The rep said that that did not include flood insurance, but that the price was applicable to both home near the shore and in the hills, with the shore properties also requiring flood insurance.

I am guessing that a lot of people carry only what they absolutely need at these kinds of prices. With the property that I am considering only about 800 ft from the shore, the flood is probably a good idea, but the rep could not give me a quote on that without more particulars, and since my questions to her were really only theoretical about the building I might build, etc. I couldn't really provide her with more info.

Maybe I need to reconsider either where I am buying or how big I am building or both.

I'll see what other kinds of feedback I get here and I'll have to make my decision within the week to either go through with my offer or begin looking back up in the hills again.

Thanks for your reply.

jogetz

On a $600,000 house, across the street from the water with an eastern exposure, we pay just over $11,000/year in homeowners insurance and another $450 or so for flood insurance. The former is through the normal insurance process; the latter is operated under the auspices of the USG.

As you already found out if you have a mortgage on your home the lender will require you insure the structure. How much insurance you need will be determined by your lender. Insurance costs are high, especially if you are near the water.

I'm not trying to sound elitest or trying to hijack the topic of your post but if the cost of insurance is going to be a determining factor in whether or not you can aford to purchase the property you might want to seriously reconsider your plans. The cost of insurance is but a fraction of the money you will spend building your new home. You see, unless you are financially able to build your home without borrowing money you are going to have to insure the dwelling whether you like it or not and you will have to insure it for an amount that will protect the lender should it be destroyed. More often than not that amount will be equal to it's replacement value.

If you are able to pay for the construction of your home withing borrowing money then you'll be able to determine how much or how little insurance you want to buy. The amount will depend solely on how much risk you are willing to take. The funny thing about insurance, everyone thinks it's a waste of money until you have a major loss and want to collect on it.

Now one more thing you should know before purchasing vacant land with the intent of building a home - building costs on the island are quite high so the $300,000 you are contemplating spending might not get you the size and quality home you have in mind. I can tell you from experience it is probably going to cost you significantly more to build your home than a comparable building where you now live. Figure on a minimum of $125 to $150 per square foot for your cistern, foundation, slab, the reinforced concrete walls with openings for the widows and doors and the roughing for plumbing and electrical. Add to that your roofing and the cost of all finish materials (floor & wall tilings, mastics, grout, hardware, plumbing fixtures, lighting fixtures, electrical switches, paints, stains, stucco, cabinetry, doors and windows which can easily amount to from $100 to the skys the limit if you want upscale designer finishes. When people ask me what to budget I tell them get your best pre-construction estimates from your architect and builder than add 50%. If that new number doesn't scare you proceed with the project. When we built our Caribbean dream home we were no different from just about everyone else we know who did the same thing - we were behind schedule and over-budget almost from day 1.

If you are contemplating building a home in the islands read the blogs on the following website before you do anything else. They are real eyeopeners:

Beach Shack - http://beachshack.ai/

The Bongo Bongo Blog - www.bongobongostjohn.com/blog/

I pay $1,000/month for wind/storm insurance. The contents of my home are not insured and I do not have flood insurance, but I am high enough that flood waters aren't a concern. I built a house in the states once, and may do so again some day, but I would never build here.

Another thing to consider, as they say "location, location, location". While it is a little more expensive to build on an incline as on a hill, most other cost are about the same. Roofing, concrete, block, electrical, plumbing, etc. If you build in a cheaper location, your house will only be worth so much, as opposed to building in a desirable / more expensive location, which then the house will increase much more.
I have seen a nice house 4000 sq ft that looks nice on the outside, just did a drive by as the neighborhood was tacky, IE; shantys for neighbors, junk in neighbors yards, wrecked cars in the roadway, etc. This poor house would probably be worth $500K or higher in a good location, but has now dropped below $250K and still not selling.

Afriend,

Thanks for your thorough response and additional pointers. I wanted to make a thorough reply back, so see below.

"As you already found out if you have a mortgage on your home the lender will require you insure the structure. How much insurance you need will be determined by your lender. Insurance costs are high, especially if you are near the water."

Yes, I know that the bank will definitely want to make sure they are covered if I need to take out a standard loan to build. What I found from the insurance company, however, is that for the basic windstorm / earthquake insurance there is really no difference in the price whether the house is located near the water or in the hills. The only difference would be the flood insurance adder for the home near the shore, and based on one of the other posts above who pays $450 per year for flood insurance on a home valued at 600k which is right across the street from the water, the flood insurance costs are immaterial.

"I'm not trying to sound elitest or trying to hijack the topic of your post but if the cost of insurance is going to be a determining factor in whether or not you can aford to purchase the property you might want to seriously reconsider your plans. The cost of insurance is but a fraction of the money you will spend building your new home. You see, unless you are financially able to build your home without borrowing money you are going to have to insure the dwelling whether you like it or not and you will have to insure it for an amount that will protect the lender should it be destroyed. More often than not that amount will be equal to it's replacement value."

That is a good point, but I'm not looking into the insurance to determine if I can afford to purchase the property, but more so to determine where it is best to buy - i.e. near the shore or in the hills. I want to make sure that the more affordable lot near the shoreline does not carry any significant hidden costs that would make it actually more expensive to develop in the long run. And that is what I am buying the property for - the long run. I have no plans to begin building any time very soon, so I will probably be able to afford to build when I do build with cash or mostly cash. There are ways of getting around the bank's insurance requirements while still using bank money to build. A home equity line of credit is as good or actually better than your standard construction loan. You can write checks as you need it and there are no loan requirements to have to deal with. That is how I am going to make my property purchase now, and by the time I am ready to build, I expect that to be paid off and to have the full credit line ready to go again. At that point I can decide if it makes sense to use all cash on the project (and lose the potential investments returns I could be making in the stock market) or to use the line of credit to do the job and pay the bank the 6% on the loan instead. The other thing I have to go back and ask the insurance rep I spoke to is (and I should have asked this in the beginning when I talked to her) is there a deductible on the policy she quoted. If so how much, and if not how would a large deductible affect the premium.

While a lot of people would just assume I am quibbling over details, I am not one who simply likes to pay the going rate on everything and be satisfied with it. I have learned (even in my bargain hunting for deals on my trips to St Croix for discounts on lodging, car rentals, flights, etc.) that a little digging can turn up nice discounts. I am the same way with all my large purchases. I like to know at least the basics about what I will be paying and to then see if I can find ways to mitigate them down to lower levels. Saving money is just as good as earning it. Either way, you wind up with more in your pocket.

"If you are able to pay for the construction of your home withing borrowing money then you'll be able to determine how much or how little insurance you want to buy. The amount will depend solely on how much risk you are willing to take. The funny thing about insurance, everyone thinks it's a waste of money until you have a major loss and want to collect on it."

You are right about that. You never appreciate something so much as on the day that you need it. Still, the insurance companies are making money quite handily. Most years they collect the premiums and its all profit with no payouts. If I can mitigate those payments down to a reasonable level, then by all means I will do it. Too many people pay too much in insurance costs. The same is true with health insurance. A lot of people pay huge premiums for policies that have small deductibles, but increasing the deductible would save them almost as much in premiums as the extra amount they have to pay due to the higher deductible ( and the nice thing about that is that if you don't have to spend all of your deductible, you get to keep it!)

"Now one more thing you should know before purchasing vacant land with the intent of building a home - building costs on the island are quite high so the $300,000 you are contemplating spending might not get you the size and quality home you have in mind. I can tell you from experience it is probably going to cost you significantly more to build your home than a comparable building where you now live. Figure on a minimum of $125 to $150 per square foot for your cistern, foundation, slab, the reinforced concrete walls with openings for the widows and doors and the roughing for plumbing and electrical. Add to that your roofing and the cost of all finish materials (floor & wall tilings, mastics, grout, hardware, plumbing fixtures, lighting fixtures, electrical switches, paints, stains, stucco, cabinetry, doors and windows which can easily amount to from $100 to the skys the limit if you want upscale designer finishes. When people ask me what to budget I tell them get your best pre-construction estimates from your architect and builder than add 50%. If that new number doesn't scare you proceed with the project. When we built our Caribbean dream home we were no different from just about everyone else we know who did the same thing - we were behind schedule and over-budget almost from day 1."

Yes, I have read about the costs for building being very substantial there. I checked out a site called "Reef Madness" that someone else had provided a link for. Its a site chronicling the trials and tribulations of people putting up a massive structure on the eastern part of St. John. It is eye opening, but I don't plan on building anything so extravagant as that.

I have assumed about 200 to 250 per square foot. There are ways I believe to mitigate that also. I think that the numbers I am assuming are for standard concrete construction. I am looking into alternatives like Thermasteel that have been mentioned here on the board by Alexandra. Those types of systems are storm rated, they can reduce building costs, and also reduce building time. Further, I believe the 200 - 250 numbers also assume a finished house. I am perfectly comfortable with having a shell built with wiring and plumbing complete and then finishing most of the inside work myself. I have done extensive work on my own home here, and I can apply what I have learned there (in between trips to the beach of course 😉 ). I am following very closely the progress on the building / opening of your future Home Depot. As I said before, I don't plan to build anytime soon, so I can wait for the Home Depot to "soon come", but when it is there, I plan to be a frequent shopper. Also, my architectural expenses should be minimal; my father-in-law and my wife's cousin are both veteran architects that we can rely on.

Where did you build on the island?

Thanks again for your comments. I appreciate the time and effort you took to respond to my questions very much. There aren't a lot of places you can go to ask general questions to people who are "there", but this site is definitely one of them.

jogetz

jogetz - It's clear you've done your homework which is more than many first time posters who think 'doing research" only means asking a question or 2 on a forum. Of course, on forums like this it is difficult for the particiants to read the other person's mind and often more difficult to cram lots of pertinent information in relatively short responses. You are well on your way and are using some very sound thinking. I hope you'll come to see the realization of your dream.

We built on one of the Leeward islands (not the USVI's) but the experience is essentially the same as in the blogs I mentioned (sorry I forgot to mention "reef madness" but I read that one too). If I were to write a book or blog about our "project" it probably would be "more of the same". Just remember the moral of those stories - building in the Caribbean is not for the faint of heart or pocketbook. It is a labor of love and a costly one at that.

You are fortunate to have relatives who are well versed in architecture but make sure they are familar with building on an island and in a tropical environment. It's much different than building back in the states. I know people who used architects from the northeast and had a beautiful looking home that was well suited for heavy snows and cold winters. Unfortunately the design didn't work well on the Caribbean beach where it was built and it looked very much out of place. I don't mean to imply your F-I-L doesn't know what he's doing, far from it, but it might be useful to find a local architect or building engineer to consult with you if necssary.

One last hint, remember everything moves on "island time" so theories like "reduces building time" have little or no meaning. Our home took 3 times as long as our architect's initial estimate (which we didn't really believe) and twice as long as we initially figured.

Have fun!

Afriend,

Yes, that is a good point. When we get to the point of trying to put together the blueprints, it definitely would make sense to run them past some one who has experience with "island" building. I will be sure to do that.

"Island time" fits me perfectly (just ask my wife 😉 ). As long as we can jump through the legal hoops of time constraints for construction, etc. I will be fine with it.

One thing I did forget to mention is that we also realize we have an "out". If the future makes us change our plans and we decide building just isn't in the cards for us, then we know we can always just sell the property and call it an investment decision. That's not my first choice, but it is an option if need be. To me, St. Croix is one of the last frontiers in the USA, and its exciting to be a part of it. It also much warmer than Alaska.

Thanks again,

jogetz

IMO, you are NUTS not to have insurance on a house here. I don't care how sturdy your house is, mother nature ALWAYS bats last. You are kidding yourself if you think that you can build a house strong enough to withstand a category 4 or 5 hurricane.

All it takes is ONE strong hurricane and it's all over. Experts are predicting FIFTEEN hurricanes in the caribbean this year.

http://www.onepaper.com/stcroixvi/?v=d&i=&s=News:Local&p=1212898568

Nugblazer, predictions of 15 for the year is low, its usually more in the 20 to 30 range. Buying or building is not for the faint of heart as has been mentioned. And as most of us buy a mortgage rather then buy the house outright, we have to have insurance. The islands have had 4 and 5s. Not saying their wasn't any damage but you collect your money eventually if you're lucky and rebuild. For most of us the land is quite a bit of value of the house. Of coarse the value generally goes down after a bad hurricane hits for a while. I always tell people if your going to build/buy here be prepared to sit on it for 5 to 10 years. The good news here if you have to pick up and go quickly you can generally rent the house for what your mortgage is, if you can't don't buy it.

There is always a risk somewhere, whether its hurricanes, tornado's or earthquakes. There is a price for paradise.