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Churches on coast, near floodplains may find insurance unattainable or astronomicalcomment (0)

December 13, 2007

By Jenny Watkins

A hymnbook, a cross, a table and two chairs were the only remnants that Pastor Paul Smith found from his church after Hurricane Ivan mutilated it in 2004. The surviving items were scattered in various locations almost a quarter of a mile away from where the church once stood.

“We moved all of our belongings upstairs to protect them from the storm, but the hurricane destroyed the church and everything in it,” said Smith, pastor of Romar Beach Baptist Church, Orange Beach, in Baldwin Baptist Association.

After much prayer, the church decided to rebuild in the same spot. But since Ivan hit the coast, Smith hasn’t been able to find affordable insurance.

“Our insurance during construction cost us $40,015 for one year,” he said. “And we’ve been told that permanent insurance will cost about $50,000 per year.”

Most people would shy away from the coast after encountering such loss and astronomical insurance quotes, but the 60-member congregation of Romar Beach Baptist has decided to stay.

“We thought about selling our property, especially after getting a $14 million offer, but felt like God wanted us to step out on faith,” Smith said. “Our new building is in the shape of a lighthouse, so we’ll be God’s lighthouse on the beach to make a difference on the coast.”

However, he is still searching for more affordable insurance policies. “There’s a desperate need for affordable insurance for churches in our area,” Smith said. “Fewer companies are insuring on the coast, so policies are difficult to come by.”

There’s obvious risk attached to building on the coast, on a river or in a floodplain, but why are those churches that choose to build anyway struggling to obtain reasonable insurance policies?

“Competition isn’t the issue here; it’s the availability of policy writers,” said Skip Roberts, a Baptist and vice president of Byars & Associates Insurance. “It’s difficult for a building by the coast to obtain a policy, because insurance companies don’t want to take that risk. It’s historically unprofitable.”

That’s why churches and other businesses aren’t able to shop around and find cheaper rates. There’s a short list from which to shop. And the problem isn’t unique to Alabama. It’s an issue in Florida, Mississippi, Texas and several other states.

“Even now in some policies, we’re starting to see that when storms are named, the property is excluded from coverage,” Roberts said.

Churches near rivers or in floodplains even a long distance from the coast still could have difficulty with purchasing affordable insurance, because a flood isn’t specific to a geographic area, he said.

As defined by the Standard Flood Insurance Policy, a flood is a “general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from: overflow of inland or tidal waters; unusual and rapid accumulation or runoff of surface waters from any source; (or) mudflow.”

Most likely, properties by rivers and the beach are in a floodplain, which can be determined by a survey.
“Most churches carry standard insurance policies that cover property, liability and workers comp, but flood insurance is excluded from a normal policy,” Roberts said.

Most property insurance policies avoid covering damage caused by floods, which is why the federal government started the National Flood Insurance Program. This program enables property owners to purchase insurance protection administered by the Federal Emergency Management Agency.

“All flood insurance is handled by the federal government,” said Alfa Insurance spokesman Dave Rickey. “Agents can help customers obtain that through the federal program, but no private insurers do that.”

Even though different insurance companies can offer the program’s policies, the rates are comparable. 

So what’s the solution to high standard and flood insurance premiums?

Years ago, builders didn’t pay as much attention to the type of facilities that were constructed.
“People tried to build the cheapest buildings that they possibly could just so they could have inexpensive vacation homes on the beach,” Roberts said.

Over time, these structures were destroyed by storms and hurricanes, consequently costing insurance companies a lofty amount of money to repair and replace them.

Now builders are trying to construct structures that are sturdier and more storm resistant.

“We’re starting to see more tie-downs of roofs, hurricane-resistant windows and storm shutters, to name a few,” said Beth Chancey, Alfa Insurance vice president of property and commercial underwriting.

When the new structures start withstanding storms better, that is when there will be a visible reduction in insurance premium costs, because more insurance companies will be more likely to write policies.

“It’s more expensive to add those structures, but sometimes you have to spend a little to save,” Chancey said.
For more information about church insurance needs, contact the annuity and insurance services office at the Alabama Baptist State Board of Missions at 1-800-264-1225, Ext. 208.
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